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Malta: A Hub for e-Commerce, Digital Games & Online Gambling in Europe

June 2015 - TMT ( Technology, Media & Telecoms). Legal Developments by Chetcuti Cauchi Advocates.

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Whilst Malta’s history, sun and sea might be a good reason for tourists to come to the island, they are surely complementary but not the sole reasons to attract prospective e-commerce and gaming operators to Malta. Indeed, to the gaming and e-commerce world, Malta represents more than that. 

Being a niche for ground breaking technological solutions, having reliable laws, providing fiscal advantages and a stable environment, Malta is one of the fastest growing information and communications technology markets in Europe quickly continuing its growth as a hub for e-commercedigital gaming and online gambling.

Malta A Home for I-Gambling in Europe

As the first jurisdiction in the European Union (EU) that introduced regulated remote gambling, with an average of a hundred new applications a year and being the largest EU i-gambling jurisdiction, Malta’s success in the i-gambling arena is undisputed.  Indeed, the advantages that the Malta i-gambling license provides are numerous.

Despite principally categorizing the type of games in four main classes that cover a wide range of games including casino games, poker, lotteries bingo, betting and betting exchange, the Remote Gaming Regulations 2004 regulating i-gambling in Malta are not game or technology specific, hence, easily encompassing different games and technologies without the requirement of amending the law. This allows operators to bask in their world of imagination and creativity and permits software developers to flourish in a positive environment.

The legislator in Malta decided to provide a strict approach to licensing and monitoring of gambling operations. Malta seeks to maintain high standards in this area ensuring that licensees uphold the general dicta of the Maltese gambling licence:  proper operation of games; protection of players; prevention of money laundering and exigencies of public interest. Whilst at first glance, these high standards could be considered too stringent and austere, the controls in place are in fact an asset in themselves in that they provide the operators with certainty and fixed parameters for operation. Indeed, whilst providing protection for players on the one hand, the Malta i-gambling regime provides regulatory solutions to operators on the other, thereby achieving a balance between two opposing needs: the supplier’s and the customer’s. In addition, a Maltese licensee can vaunt a serious license with its players, hence resulting in the latter feeling secure when dealing with such operators.  In the case of Malta i-gambling licensees, players find comfort in knowing that they are dealing with an onshore jurisdiction whose legislation is in line with the applicable EU legislation and international agreements. 

Money matters and Malta continues to be a highly affordable and fiscally attractive jurisdiction to i-gambling operators. Gambling taxes vary according to the type of gambling activity undertaken, with an advantageous rate of 0.5 per cent set for betting transactions whilst the maximum gambling tax payable annually by a licensee in respect of any one license is €466,000.  In addition, Maltese Companies are subject to the normal corporate tax rate applicable to all companies registered in Malta, at 35% on their worldwide income. Malta operates the full imputation system of taxation whereby the tax paid by the company is available as a credit to the shareholders when distributions are made to them.  Company tax of 35% is available as a credit to the shareholders upon receiving dividends from the company. When dividends are paid by trading companies to the shareholders, these shareholders become entitled to claim refunds of 6/7ths of the Malta tax paid by the company. Taking into account such refunds, this results in an effective rate of Malta tax of 5%.

Malta offers an attractive flat 15% income tax rate for individuals drawing employment income from Malta i-gaming licensed companies and having a minimum gross salary of Euro 75,000, as adjusted annually in line with the Retail Price Index.

Incentives for Digital Gaming in Malta

The Malta digital gaming industry enjoys a widespread range of incentives that address the needs of digital gaming companies at the initial conceptual stage, during research and development, as well as during the internationalization and marketing of the digital gaming product.

The incentives and schemes available include:

  • a games fund providing financing digital gaming companies seeking to develop new projects;
  • tax credit relating to expenditure incurred in acquiring or developing tangible and intangible assets;
  • financing to new digital gaming start-ups and enterprises engaged in new markets, new technologies, novel products or services that demonstrate a potential for job creation and growth;
  • tax credit for research and development of digital gaming projects;
  • co-financing of wages of employees, leasing of equipment and amenities in the case of SMEs;
  • co-financing up to 50% of costs incurred for market development  to encourage more digital gaming enterprises to internationalise

In translating these digital gaming incentives into finalised products, Malta offers a highly skilled workforce that addresses the cross-disciplinary skills required by the digital gaming industry, including sound designers, musicians, artists, game designers, programmers and level designers.

As a jurisdiction that gives access to protection of intellectual property in the European and international markets, Malta digital gaming companies may protect their artistic creations or distinguish the goods and services from those of other traders through straight-forward or hybrid solutions and in a jurisdiction that offers favourable tax treatment.

E-Commerce: Experience, Reputation and a Stable Environment

In addition to the specific incentives addressed to the i-gambling and digital gaming industry, Malta is fast becoming the natural home to international e-commerce business. The growth of the Malta i-gambling industry in the last decade has been facilitated by the tandem growth of ancillary services, such as ICT, telephony, co-location legal and back office services. All this, coupled to a sound regulatory regime, has positioned Malta as a one-stop destination to any type of e-commerce business

Malta’s added advantage is the fact that it is an onshore jurisdiction.  Maltese operators do not face the difficulties that offshore operators face with exchange controls, access to capital markets and access to e-wallets and payment gateways worldwide. These benefits are supported by the fact that Malta has a stable economy,it being one of the few EU Member State to have registered economic growth in the last months despite the global financial and economic crises.

Tuned to the original exponential growth of the i-gambling industry, Malta presents itself as a jurisdiction apt to address the dimension of the e-commerce market as a whole. The fast-pace of the Malta e-commerce industry and the governmental action to the industry are translating into varied opportunities for new start-ups to conceptualise new projects while permitting existing operators to explore new niches obtaining edge on competitors.