VAT Guidelines
The new VAT Guidelines introduced in relation to Gambling and Betting are effective 1st January 2018.
These guidelines are the 1st steps in a series of changes that are being introduced to render the VAT status of these operators more robust and to reduce reliance on measures such as Joint Venture arrangements.
As per the current VAT Act, Item 9 of Part Two of the Fifth Schedule to the Value Added Tax Act exempts from VAT “Government lotto and lotteries, the supply of agency services related thereto, and such other supplies related to gambling as may be approved by the Minister”.
With effect from 1st January, 2018, these supplies related to gambling approved by the Minister are to be strictly limited to the following list:
i. The provision of any facilities for the placing of bets and wagers, including the services of book makers, betting exchanges and any equivalent facilities. The ‘placing of bets and wagers’ refers to gambling on the outcome of an event, which outcome is unknown at the time of the placing of the bet or wager.
The term ‘event’ includes, but is not limited to: a sporting event, both real life or virtual; a competition; a lottery; the performance of an index; and a natural phenomenon.
For the purposes of this guideline, ‘placing of bets and wagers’ shall exclude gambling on the outcome of: (a) casino-type table games such as blackjack, poker and roulette; and (b) any games of chance, the outcome of which is determined by a random generator.
ii. The granting of the right to participate in a lotto or lottery, including Grand Lottery, Super 5, scratch cards, keno and any other lottery-type games;
iii. The granting of the right to participate in a bingo game;
iv. The provision to players of devices or equipment for the playing of casino-type games of chance, the outcome of which is determined by a random generator, including tables for the playing of roulette, blackjack, baccarat, poker when played against the house, and slot machines.
The terms “devices or equipment” refers to game tables, machines and other similar objects which are physically located in such premises or location, including a studio, which is licensed, or otherwise recognised, by the Malta Gaming Authority, whether accessed by the player physically or remotely.
For the avoidance of doubt, “devices or equipment” excludes “amusement machines” as defined in Chapter 438 of the Laws of Malta, and “remote gaming equipment” as defined in S.L. 438.04; and
v. Supplies which are strictly required, related and essential to, and which form part of an underlying gambling or betting transaction falling within paragraphs (i) - (iv) above, as shall from time to time be determined by the Malta Gaming Authority.
Therefore, based on the above;
Exempt Supplies include: event betting, lotteries, bingo, casino type games played on devices or equipment (including live casino) and qualifying supplies.
Taxable Supplies include: Casino not on a device like online casino except live casino, P2P games (eg. poker) presently licensed under Class 3 excluding betting exchanges, games of skill and Class 4 type services in relation to the above.
Steps to consider:
- Determine if supply is ESS (an Electronically supplied Service) /Non- ESS (applicable for foreign players)
- Taxable Vs Exempt based on above guidelines
- Input Tax Recovery by applying partial attribution
- Article 10 VAT Registration & Compliance.
If Malta company provides supplies to Maltese players, and the service a taxable service as per above, then the Maltese operator has to charge Maltese VAT to Maltese players.
If Malta Company provides ESS services, place of Supply would be outside Malta. However, Step 2 above needs to be considered since if the supply is taxable (eg. an Operator is providing P2P games) then this taxable status will give the right to the operator to claim input VAT. If it provides mixed supplies, it will still have a right to claim input VAT related to the taxable supplies, and partial attribution would need to be applied on the general purchases.
If Malta company provides Non ESS services, then place of supply would be Malta. In this case, if the service is exempt, eg, the operator is providing event betting, it will have no right to claim input VAT.
If the company provides taxable supplies or mixed supplies, it would need to register under Article 10. If it is registered under Article 12 it would need to change its VAT registration to Article 10 to be able to exercise its right of claiming its input VAT or applying the partial attribution method to claim part of the Input VAT.
B2B Operators
In relation to B2B Business, these need to consider the activities/suppliers provided by their customers being B2C operators. Class 4 operators need to split their activities between B2C operators where onward supply is taxable and B2C operators where the onward supply is exempt.
Taxable value of gambling and betting services
For the purposes of determining the taxable value of gambling and betting services that fall within the scope of article 4 of the Value Added Tax Act, the term “consideration” shall be construed as follows:
(i) Where the supplier receives a commission or participation fee (typically referred to as the ‘rake’), the said commission or fee (including when the commission/fee is settled using bonus credit) shall be regarded as the consideration for the service, which shall be deemed to be inclusive of the VAT chargeable under the Value Added Tax Act.
(ii) In all other cases, the consideration received by the operator shall, for the purposes of determining the taxable value, be an amount equivalent to the revenue of the supplier, i.e. the total stakes/bets placed by players (including bets placed using bonus credit) less the winnings and other amounts paid out to players in connection with that bet (including bonus credit comprised within the bets placed - refer to section 1.2(ii) below). The consideration determined as aforesaid shall be deemed to be inclusive of the VAT chargeable under the Value Added Tax Act.
Exclusions
(i) Any amount of the commission or fee received by a supplier, or of the stakes/bets placed by the player, in relation to supplies which fall within the scope of article 4 of the Value Added Tax Act, which is immediately allocated by the supplier to a jackpot pool is to be deducted for the purposes of determining the taxable value.
(ii) Bonuses and other incentives which are provided by the supplier are considered to constitute a rebate or price reduction allowed by the supplier to the customer in terms of item 3 of the Seventh Schedule of the Value Added Tax Act, and as such should be excluded from the taxable value of the supply when such bonuses have been included within the consideration received by the supplier for the purposes of 1.1 above, by the aggregation of the amount of that bonus to the winnings and other amounts paid out to players in connection with that bet.
Periodic determination of the taxable value
In principle, the taxable value of a supply is to be determined on a transaction per transaction basis. However, the VAT Department acknowledges the particular nature of gambling and betting services, and the practical difficulties that could arise in the application of this principle. The taxable value of those gambling and betting services falling within the scope of article 4 of the Value Added Tax Act shall be determined on the last day of a given tax period, by reference to the aggregate taxable value of transactions during that tax period.
Issuance of fiscal receipts
A person who makes supplies of gambling and betting services that fall within the scope of article 4 of the Value Added Tax Act and which are not exempt pursuant to item 9 of Part Two of the Fifth Schedule to the Value Added Tax Act is exempt from the obligation to issue fiscal receipts in terms of article 51 and the Thirteenth Schedule to the Value Added Tax Act.
These guidelines shall be applicable to the determination of the taxable value of gambling and betting services as from 1st January, 2018, and are restricted to the determination of the taxable value for the purposes of the Value Added Tax Act.
About the Author
Christabelle Agius graduated from University of Malta in the Bachelor of Accountancy (Hons) degree and is CPA certified. She is responsible for servicing a portfolio of clients in their daily accountancy and banking requirements. This entails approval of clients’ banking transactions, book-keeping, preparation of management accounts and liaising with external auditors, compilation of VAT Returns, handling employment registrations and taking care of the monthly payroll.
