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MALTA I-GAMING (Tough Future)


We have recently been involved in a few discussions regarding the future of Malta has an I-Gaming hub.We thought we would share our thoughts and findings through our website.


Brief History


When Malta joined the European Union in 2004 several doors where opened,the most obvious one at the time was a beneficial tax rate.International trading companies (with no trade in Malta) where allowed rebates which reduced corporate tax liability to 4.17%, a few years later that was increased to 5%,that remains in place until today.The MFSC (Malta Financial Service Centre) which later became the MFSA (Authority) already had winner number two up their sleeves.Back in the year 2000, Malta had licensed it´s first online betting site,it compared well to that of Gibraltar since entry levels and costs where much lower.Betting tax was set at a competitive at 0.5% with an annual cap of 200,000 Maltese Liri (€460,000).


In the years since,Malta has grown it´s i-gaming industry to 300 companies with over 500 licenses being granted,it is said that gaming companies in Malta employ 9,000 people locally and many more worldwide.In a recent interview Dr José Herrera stated : ``The effect this has on the Maltese economy is significant. Gaming contributes to 12% of the GDP, two-thirds of which is accounted for by remote gaming. Moreover, the igaming industry injects €60 million annually to the national coffers through direct taxation´´.


The new Silicon Valley


Malta likes to portray itself has the new Silicon Valley.in fact, SiGMA (the Summit of iGaming in Malta) released the following comments: our beliefs are that Malta has become the natural host for gaming entrepreneurs, with so much to offer, including:


1. An industrious, multilingual workforce with a Nordic work ethic. The recent economic crisis, for instance, hit most southern European states, but not Malta.

2. An unrivalled quality of life, weather and leisure opportunities, as well as a safe environment where young families have the peace of mind they require to raise children.

3. A solid jurisdiction, optimal tax benefits and a supportive government with an “open door policy”. Malta Enterprise (Digital Games), the LGA, the Malta Tourism Authority, the Malta Financial Services Authority: they all work in the same direction to ensure that brand Malta stays on top of the game.

4. The remote gaming community based in Malta is intensive, thus creating endless networking and recruiting opportunities.


Reality Check


Now we get to point out a few hard facts:


REGULATION: When Malta started licensing i-gaming companies many EU countries had no legislation in place,cross border transactions where much easier,that´s all changed.Most countries have bought in their own legislation (meaning local license is required) or will do so in the near future,the UK is the perfect example with it´s POC (point of consumption) tax,any company wishing to take bets from UK residents needs a UK license and to pay local gaming tax.


TRANSMISSION OF BETS: Many of these i-gaming operators (in Malta) made their money from high street betting shops located elsewhere,take Germany for example,shops/agents/franchise partners would transfer all bets so the transaction would take place in Malta,whilst this loophole is still open Germany will introduce it´s own gaming license at some stage,for the time being the German Finanzamt have imposed a 5% betting tax on all bets taken from locals,irrespective of where the company is located! 


DATA HOSTING: Servers,technical hardware and what amounts to a limited network is both expensive and not comparable with the likes of the UK,it´s very unlikely that an operator would locate or remain in Malta for the technical infrastructure.


HUMAN RESOURCES: Marketing companies have moved to East Bloc countries such has Bulgaria or the Baltic States,it´s cost effective,their is a much larger pool of workers available and no need for relocation.


VAT LAWS: The EU have started bringing in new Vat laws based on where the customer is located (place of supply),like with other regulation,this is expected to make a big impact,it certainly removes any advantage.


I-GAMING TAX: Malta have several forms of gaming tax dependent on niche,for the record: Class one: €6990 per month , Class two: 0.5% on every bet struck, Class three: 5% of net win and Class four: €4600 per month, collecting these duties has been a main source of income for State coffers, each and everyone of these lucrative taxes will disappear since i-gaming companies are being forced to pay local taxes and license locally.


CORPORATE TAX: Standard company tax in Malta is 35%,this is reduced to 5% if all business is done internationally (don´t take local action),the EU won´t allow this to continue forever since it´s an unfair advantage, furthermore, Corporate taxation  can be reduced by structuring cleverly,take Betradar and it´s invoicing from Switzerland to avoid VAT!


REST OF THE WORLD: Their are some parts of the world where residents are allowed to wager freely, but why would they go to a Maltese i-gaming operator? most gamblers still see the UK has the most serious domicile for i-gaming,for the ones who don´t care, Curacao would do just fine and the costs are considerably lower!


MGA: For those that don´t know the LGA has become the MGA (Malta Gaming Authority),the people in power consider it to be more serious (more poppycock). The fact is, i-gaming operators in Malta are territorially restricted and their is little scope,the once grey markets are now black.


COSTS: Malta is not cheap,Prime office space is over-priced,Hosting and Employees are far from competitive! 


Conclusion.


It´s a dead duck.Foreign governments have put the block on Malta´s lucrative deal.


I´m not going to dwell on the fact that the government has categorically failed to create a viable alternative,invest in the infrastructure or local entrepreneurs.We could also point out that the LGA (MGA) has a bad name for consumer protection or that it is expected to raise extra revenue from penalizing companies for non compliance,but where´s the point. Malta´s only chance was the mini-Vegas route but it´s protectionist of it´s own territory!!


Other peoples money  - When i think of i-gaming Malta that film always comes to my head!