iGaming Malta

Malta iGaming Industry Overview

Malta has become a hub for iGaming companies over the past decade. Through a solid regulatory regime, as well as Malta’s advantageous gaming tax benefits, Malta has developed a reputation of excellence within iGaming Industry.

The determination of the local authorities to develop the iGaming industry resulted in the pro-active approach to ensuring efficiency, transparency and effective regulation of the iGaming in Malta. This makes Malta one of the most attractive EU jurisdictions to establish an iGaming business in and obtain a license from the Malta Gaming Authority.

TYPES OF LICENSES IN MALTA

There are two types of licenses issued by MGA: Business-to-Consumer (B2C) and Business to Business (B2B) critical supply.

• Services that constitute a gaming service and require a B2C license:
  • Offering, provision or operation of a gaming service;
  • Hosting by a person in his premises accessible to the public, the operation or making available for use a gaming device or gaming system
• Services that constitute a critical gaming supply and require a B2B License:
  • Supply and management of a material element of a game;
  • Supply and management of software, to generate, capture, control or process essential regulatory record and/or supply and management of the control system itself on which the software resides.

The following types of gaming supplies specifically constitute material gaming supplies:

1. Manufacturing, assembling, placing on the market, distributing, supplying selling, leasing or transferring a gaming device;
2. Providing risk management services for the operation of a licensable game;
3. Providing event, content and, or odds;
4. Providing fraud management services for the operation of a licensable game;
5. Holding and, or managing player funds;
6. Providing services relating to customer due diligence;
7. Providing services related to player identity verification;
8. Providing co-location services and other managed information technology services, including cloud computing services and, or decentralised hosting protocols where the latter do not amount to critical gaming supply; and
9. Providing back-up and disaster recovery services.

TYPES OF GAMES

There are four type of games that can be provided under a gaming license. An applicant applying for a gaming service or a critical gaming supply can offer one or more of the following game types:

1. Type 1: Games of chance played against the house, the outcome of which is determined by a random generator, and shall include casino type games, including roulette, blackjack, baccarat, poker played against the house, lotteries, secondary lotteries and virtual sports games; and, or
2. Type 2: Games of chance played against the house, the outcome of which is not generated randomly but it determined by the result of an event or competition extraneous to a game of chance, and whereby the operator manages his or her own risk by managing the odds offered to the player; and, or
3. Type 3: Games of chance not played against the house and wherein the operator is not exposed to gaming risk, but generates revenue by taking a commission or other charge based on the stakes or the prize, and shall include player versus player games such as poker, bingo, betting exchange, and other commission-based games; and, or
4. Type 4: which shall refer to controlled skill games.

In the case of game displaying elements which may fall under more than one of the types referred to above, the MGA shall have full discretion in categorising the game in the type it believes closest reflects the nature of the game.

Malta iGaming License Application Process

The application process is broadly split into 2 phases:

Malta iGaming License Application Phase 1

A pre-application phase whereby the MGA will run a check to ensure the application is correctly developed and all the key elements are present. The Purpose for this is to expedite the licensing process.

Malta iGaming License Application Phase 2

A second stage whereby applicants submit all the required information at one go. The MGA will assess whether the applicant is:

• Fit and proper’ to conduct gaming business.

MGA conducts a fit and proper exercise by evaluating all information related to shareholders, UBOs, and the relevant key functions (which will be appointed) and also on the business viability of the operation.

• Properly prepared for a business strategy perspective.

MGA conducts an analysis of the business plan. The applicant’s business plan is expected to have a detailed forecast of the operation, including marketing and distribution strategies, HR plan and growth targets.

• Possesses the operational and statutory requirements to meet legal obligations.

This process includes examination of incorporation documents, the operational policies and procedures, the games and the gaming and control systems, the technical setup, including system, network and application architecture, the rules, terms, conditions and procedures of the games, and other documents which might be required.

• Has the required technical specifications in place before going live.

Once all three areas are successfully completed MGA will inform the applicant that the application was successful and will invite the applicant to implement onto a technical environment in preparation to going live.

On both B2B and B2C licensees there is an obligation to appoint the relevant key functions, who must also be approved by MGA. Each key functions will be responsible to carry out their role in a particular area as player support, responsible gaming, marketing, and advertising, legal affairs, and other areas. Each position irrespective of whether the same position being held by the same individual includes a fixed fee of €50 per position.

For a B2C licensee, that provide a remote gaming service and, or operate a controlled gaming premises, key functions shall be the following:

1. The chief executive role, or equivalent;
2. The management of the day-to-day gaming operations of the licensee, including but not limited to, the management of the financial obligations of the licensee, such as the payment of tax and fees due to the Authority, the processes of making payments to, and receiving payments from, players, the management of the risk strategies for the operation of the licensee, and the prevention of fraud to the detriment of the licensee;
3. Compliance with the obligations of the licensee as may be applicable by virtue of the Act and any binding instrument issued thereunder, including but not limited to, obligations relating to responsible gaming, obligations relating to player support, obligations relating to the rules relating to marketing, advertising and promotional schemes, and where applicable, obligations relating to sports integrity;
4. The legal affairs of the licensee, including but not limited to matters relating to contractual arrangements and dispute resolution;(e) The adherence to applicable legislation relating to data protection and privacy;
5. The prevention of money laundering and the financing of terrorism;
6. The technological affairs of the licensee, including but not limited to the management of the back-end and control system holding essential regulatory data, and the network and information security of the licensee; and
7. Internal audit.

In addition to key functions (a) to (f), for B2C licensees operating gaming premises which is not a controlled gaming premises, the key functions also include:

1. Operation of the urn or any other gaming device which requires human intervention used to generate the result of the game in bingo halls:

Provided that where the operation of such urn or other device is supervised by an additional person who is not an officer of the Authority, it shall be sufficient for either the person operating the urn or other device or the person supervising to be approved to provide such key function;

1. Management of the pit, including the supervision of the croupiers and assistants and the management of their work, where applicable;
2. Management of the gaming area, including the supervision thereof to preclude fraud by customers, and the resolution of customer disputes
3. Management of the surveillance systems of the gaming premises, where applicable; and,
4. Internal audit.

For a B2B licensee, the key functions shall be the following:

1. The chief executive role, or equivalent;
2. The management of the day-to-day gaming operations of the licensee, including but not limited to, the management of the financial obligations of the licensee, such as the payment of tax and fees due to the Authority, and the management of the risk strategies for the operation of the licensee;
3. Compliance with the obligations of the licensee as may be applicable by virtue of the Act and any binding instrument issued thereunder, including but not limited to obligations relating to sports integrity where these are applicable;
4. The legal affairs of the licensee, including but not limited to, matters relating to contractual arrangements and dispute resolution;
5. The adherence to applicable legislation relating to data protection and privacy, where applicable;
6. The technological affairs of the licensee, including but not limited to the management of the back-end and control system holding essential regulatory data, and the network and information security of the licensee; and
7. Internal audit.

SETTING UP A MALTESE COMPANY

In order to apply for a licence, it is necessary to set up a Maltese limited liability company. For the purpose of MGA licencing, the MGA requires that the applicant company have a certain amount of share capital in proportion to the gaming business. The company may thus incorporate with a low share capital.  However, immediately prior to the licence issue, the MGA will request an increase in share capital. The level of minimum share capital required by the MGA depends on the licence type.

ISSUANCE OF LICENCE

Once MGA approves the gaming application, it issues a licence valid for 10 years, which is renewable upon a fee. A Licensee can commence its activity after acquiring the gambling license. If there will be any changes in relation to the gaming service/ equipment being offered, which differs from the original gaming license application, it must be submitted for approval to the Authority.

COMPANY MAINTENANCE

The law requires that a Gaming Company meets certain annual and ongoing obligations. As a result, the main compliance matters to take into consideration are the following:

• The Gaming Company must register for income tax purposes upon registration and required to submit a tax return.
• Submit an annual return (detailing the company, its shareholding, and officers) with the Malta Business Registry.
• It is also required to prepare annual financial statements in accordance with the International Accounting Standards and to have the financial statements audited.
• An MGA licenced gaming company must prepare interim financial statements every six months and submit them to the MGA.
• A gaming company needs to register for VAT and pay Maltese VAT on certain supplies procured from Malta or from abroad. This may involve the submission of official VAT forms. As a rule, a gaming company cannot recover input VAT but qualifies for some exemptions.

COMPLIANCE REVIEW BY MGA

MGA has the power to require any licensee/ authorized person to undergo under a compliance audit on a regular or ad hoc basis.

After going live a licensee shall undergo under a number of compliance reviews of its operation as below:

• After the 1^st year of operation after obtaining the license by MGA;
• Any other audits depending on the discretion of MGA.

Failure of the Licensee in relation to the compliance review would lead to suspension or termination of the license.

OFFICIAL MGA COSTS

Licensed gaming companies must pay certain fees to the MGA in relation to their licence and gaming operations.  The application costs, licence fees, MGA audit fee per application, are as follows:

LICENSE APPLICATION FEE AND RENEWAL FEE

The one time, non-refundable license application fee is EUR 5000. This fee is not refundable irrespective of whether the gaming authority issues the license or not. In addition, there is also a one-time non-refundable fee of EUR 5000 upon the expiration of the license (10 years).

ANNUAL FEES

COMPLIANCE CONTRIBUTION

• B2C – Gaming Service License

B2C – Type 1 Gaming Services; Minimum* €15,000; Maximum €375,000

B2C – Type 2 Gaming Services; Minimum* €25,000; Maximum €600,000

B2C – Type 3 Gaming Services; Minimum* €25,000; Maximum €500,000

B2C – Type 4 Gaming Services; Minimum* €5,000; Maximum €500,000

• B2B – Critical Gaming Supply Licence

B2B – Critical Gaming Supply | Annual Licences fees used (supply & manage material elements of the game)

B2B – Critical Gaming Supply | Annual Licences fees used (supply & management of software)

MALTA IGAMING TAX

A Gaming Tax is due to the MGA every month. Although the reference given to this official charge is a ‘tax’ it is different and separate from the income tax on profits due by the operator/gaming company payable to the Maltese income tax authorities. See below for information about income tax due by a limited liability company. The gaming tax depends on the applicable class:

• Class 1 licence – €4,600 per month for the first 6 months, thereafter, €7,000 per month.
• while a Class 1 on an existing class 4 licence – €1,165 per month.
• Class 2 – 0.5% of the gross amount of bets accepted
• Similarly, a Class 2 on 4 – 0.5% of the gross amount of bets accepted in remote gaming betting operations
• Class 3 –5% of real income
• Class 3 on 4 – 5% of real income
• Finally, a Class 4 –0 tax for the first 6 months. Followed by €2,330 per month for the next 6 months and €4,660 per month for the remaining period
• Class 4 licensee hosting and managing an operator which is not in possession of the relevant Class 1, 2 or 3 licence in terms of the regulations, however hosting an EEA licensed Business to Consumer operator – €1,165 per month per operator, paid by the Class 4 Licensee

CORPORATE TAX

A Limited liability company registered in Malta is taxable on world-wide income. Companies suffer tax at a flat rate of 35% on their chargeable income and capital gains. Indeed, there is no separate capital gains tax or corporate tax. Gains realised from the transfer of shares and intellectual property and certain other intangible form part of income. These are thus taxed at 35%.

The shareholders of the Maltese Gaming company can claim a refund of tax paid at corporate level. The extent of the refund depends on the nature and source of profits and on the account that pays these profits (companies allocate profits to various tax accounts). For further information about Tax Refunds and Participation Exemption regime please contact us.

E&S Group iGaming Malta Services

As we aim to provide most of the services under one roof, our experts are also equipped and experienced in assisting our clients who wish to expand to the UK and other markets. Our experienced iGaming experts will be happy to assist you in obtaining iGaming licenses in the UK as well as Sweden and Estonia upon request.

We can assist clients who wish to set up remote gaming operations in Malta by providing a full range of initial and ongoing legal and support services.

• Applying for Remote Gaming license and liaising with the MGA throughout all stages
• Preparation of a Business Plan
• Tax and VAT optimisation and planning
• Company compliance
• Key functions Services, MLRO and Compliance Officer.
• Sourcing IT infrastructure support
• Advice on and overseeing B2B arrangements, including all IT and IP use and licencing aspects
• Comprehensive Legal Back Up
• License Acquisition from other Jurisdictions
• Accounting (including Financial Reports, Monthly Reports, Monthly Management Accounts including monthly journals, General Bookkeeping procedures, Treasury management (includes payments from banks) , Payroll, Processor Reconciliations (making sure every deposit and payout reconciles to Processors) and Bank Reconciliations, Budgeting and Forecasting
• Full Corporate & Banking Solutions with Gaming Friendly Banks
• Payment Solutions / Payment Processors and Specializing in Integration of Payment Solutions with Software
• Affiliate System Software
• Multi-Language Web Portals (Casino Management System)