Malta has a dynamic economy based on international trade and international business. Amongst its achievements, Malta has built a sound and competitive manufacturing and services base that does not rely only on its favourable geographic position but also on its multi-skilled, multi-lingual workforce. Malta has been exceptionally successful in attracting foreign direct investment. Indeed Malta offers a highly-competitive and diverse investment location for high value-added industries and service providers particularly those engaged in ICT. ICT is considered to be a pivotal activity with major developments taking place in e-commerce, m-Commerce and e-Government.
The remote gaming sector is the most dynamic and the fastest growing gaming sector in Malta. In 2004, Malta lead the way in Remote Gaming regulation, by being the first European Union Member State to regulate remote gaming, by issuing avant garde and technology neutral regulations, as well as by having a regulatory approach which favours innovation and business development while ensuring that player protection is at the centre of the regulatory framework. The changes made to the licensing procedure confirm that notwithstanding the regulatory turmoils which the European Gaming industry is facing at the moment, Malta is still the leading jurisdiction in the regulation of remote gaming.
While the European gaming market continues to be challenged by national regulatory regimes each requiring a national licence, i-gaming operators are facing a myriad of legal issues running along the lines of geographical national boundaries. Malta’s position has always strived to ensure that operators retain their right to provide services directly from Malta without the requirement of obtaining burdensome licences from other jurisdictions. The island’s data storage and more importantly its data transmission infrastructure is easily accommodating gaming operators holding various jurisdictional gaming licences who choose to centralise their systems in a secure, high quality and cost. This is why today Malta is one of the major hubs for the licensing and setting up of online gaming and betting companies.
Gaming and Betting Legislation
The Lotteries and Gaming Authority (www.lga.org.mt) established under the Lotteries and other Games Act is responsible for issuing gaming licences, ascertaining that licensees are fit and that proper persons are carrying out the functions relative to gaming. The LGA also ensures that licensees comply with all of their licence conditions and that games and gaming are kept free of criminal activity. With the Act the legislator intended to have a comprehensive interlinked legislative regime that did not only stop at having a sound and robust remote gaming legislative framework, but which also encompassed strong interdependencies with other laws, such as the link with the Anti-Money Laundering Regulations and its principles, Data Protection, anti-corruption laws in sports, cybercrime regulations, investment promotion, tax rules, advertising codes and others.
The Remote Gaming Regulations, issued under the said Act, ensures that Malta’s regulatory framework remains current and relevant, thus explaining why Malta continues to steadily attract operators to seek to be thoroughly regulated in and from Malta. They apply to all types of technologies and games and focus on regulating the means and control the procedures of remote gaming such that the fundamental principles of gaming are preserved.
Licensing of Remote Gaming Operations
Any person engaged in the carrying out of remote/online gaming activities in or from Malta must be licensed by the LGA to provide remote/online gaming operations. The applicants must satisfy a set of criteriaand thus:
- be a limited liability company registered in Malta;
- be fit and proper;
- demonstrate adequate business and technical ability to carry out such an operation;
- prove that the operation is covered by sufficient reserves or securities and that payment of player winnings and deposits is ensured.
Licence Application Procedures
Phase 1: Assessment of the financial ability of the applicant to carry out the business and a due diligence check of the applicant are performed by the Gaming Authority. A probity check on all stakeholders with more than 5% shareholding interest is carried out. A business plan must be submitted for review by the Authority.
Phase 2: The Gaming Authority will review the System Architecture and Application Architecture, rules of the games, playing procedures and operator’s procedure. At the end of phase two a letter of intent is issued which is in essence a provisional license for 6 months.
Phase 3: In this phase the licensee is expected to go live. The Authority will closely inspect the gaming office’s control system, which must be located in Malta and related administrative and accounting procedures to ensure compliance with the Act and the Regulations. Control systems must be certified as being compliant. Certification shall be based on ISO/IEC17799 standard and there is no need to test source-code. Certified RNGs having a certificate detailing their level of randomness shall not be retested. Certification must be carried in Malta on the live system and shall be carried under the direct supervision and co-ordination of the Authority’s Remote Gaming Inspectors. Certification must be carried within six months from date of issue of letter of intent.
However, what distinguishes such license process from that of some other ‘less rigorous’ jurisdictions, making Malta a desirable destination for prospective applicants is the serious application process which is applied.
The Remote Gaming Regulations establish four (4) Classes of Remote Gaming Licences, these being:
Class 1: a remote gaming licence (eg. – casino type games, online lotteries) whereby operators manage their own risk on repetitive games. It is also possible to have a Class 1 on 4 licence whereby the Class 1 licensee operates its games on the software and in certain cases through the equipment of a Class 4 licensee;;
Class 2: a remote betting licence (eg. – fixed-odds betting) whereby operators manage their own risk on events based on a matchbook.. This class includes fixed odds betting, pool betting and spread betting;
Class 3: a licence to promote and/or abet remote gaming in or from Malta (eg. – poker networks, peer-to-peer (P2P) gaming, game portals) whereby operators take a commission from promoting and/or abetting games. It is also possible to have a Class 3 on 4 licence whereby the operator uses a licenced Class 4 as its platform;
Class 4: a licence to host and manage remote gaming operators, excluding the licensee itself, whereby software vendors provide management and hosting facilities on their platform. In essence this is a business to business (B2B) gaming licence. .
Licensing Fees
Upon submission of an application for a Remote Gaming Licence, a one-time application processing fee of €2,330 is payable to the LGA. Prior to commencement of the mandatory compliance audit, a one-time certification audit fee of €2,750 is also payable to the LGA. Upon issuance of the Remote Gaming Licence, and each year thereafter, an annual fee of € 8,500 is payable to the LGA. Upon application for the renewal of a remote gaming licence, a renewal fee of one thousand and five hundred euro (€1,500) shall be paid by the licensee to the Authority.
The main conditions for the granting of a License
The main conditions include the following:
· Licensee must be actively operational
· Adherence to the provisions for the protection of players
· Conformity to anti-money laundering practices
· Appointment of a key official to supervise all the operations and ensure that licensee complies with all applicable laws and conditions of the licence. The key official must be a director of the company and resident in Malta.
Information for players
The licensee is obliged to make available to the players all rules relating to the authorised games offered by the licensee and processing fees, if any, incurred by the player. Furthermore, the licensee’s web site home page should amongst other things specify the licensee’s details, including the fact that the licensee is licensed in Malta and include a link to the Authority’s website.
Registration of players
Prior to allowing a player to participate in a game, the licensee must register the player. Registration details must include the player’s identity, age and place of residence. A licensee is prohibited from providing loans or giving any credit to players in order to enable them to participate in any games offered by the licensee.
Protection of players’ money
In accordance with the regulations, players’ money must be kept in a client account held with a credit institution approved by the Authority and separate from the funds of the licensee. The licensee must ensure that funds in the clients’ accounts, including funds in transit or in the process of clearance are equivalent to the aggregate amount standing to the credit of players’ accounts held by the licensee.
The licensee should allow a player the option to place a limit on the amount that may be wagered over a specific period of time or the amount of losses that may be incurred. The licensee must have the necessary security features in place for ascertaining player’s credit card details and payment patterns. These features will also serve to protect the licensee from fraud.
The Key Official
The Remote Gaming Regulations necessitates that every Licensee must appoint a ‘Key Official’, who must be approved by the LGA, which will carry out its due diligence to ensure that the person so appointed is fit and proper to hold such post. In addition to being a fit and proper person, the Key Official must be resident in Malta and a Director of the licensed company registered in Malta.
But what is the role of the so-called Key Official? The scope of such figure is manifold. The main functions of the Key Official include that of personally supervising the Licensee’s operations and that of ensuring that the Licensee abides by all Licence conditions and directives issued by the Lotteries and Gaming Authority and acts in accordance with all applicable laws and regulations. Moreover his role also comprises being the:
- Primary Point of Contact with the LGA;.
- Responsible Key Person having due representation onbehalf of Licensee;
- Guardian of the Remote Gaming Licence;
- Readily available to see to the Authority’s requests and needs;
- Liable and Responsible with the holder of the licence in terms of law
Accounting records
The licensee shall keep proper accounts and records which show a true and fair view of the financial position and state of affairs of the licensee and shall within 60 days from the end of its financial year file with the Authority an audited set of financial statements. Interim financial statements shall also be submitted to the Authority within thirty days from the end of the half yearly period.
Gaming Tax
The Regulations propose a gaming tax which varies depending on the type of licence held as follows:
A Class 1 licensee, shall pay a sum equivalent €4,660 for the first six months and subsequently €7,000 per month for the entire duration of the licence period:
A Class 2 licensee, including a Class 2 licensee operating on a hosting platform in possession of a Class 4 remote gaming licence, shall pay a sum equivalent to 0.5% of the gross amount of bets accepted in remote betting operations.
A Class 3 licensee, including a Class 3 licensee operating on a hosting platform in possession of a Class 4 remote gaming licence, shall pay a sum equivalent 5% of real income:
A Class 4 licensee, hosting and managing other remote gaming operators, shall pay –
(i) no tax for the first six months;
(ii) €2,330 per month for the subsequent six months;
(iii) €4,660)per month thereafter for the entire duration of the licence:
There is a tax capping mechanism which limits the gaming tax payable annually by any one licensee to a maximum of €466,000.
Taxation
Apart from the beneficial tax rates for the gaming operation itself, utilising a Maltese registered corporate entity ensures a favourable tax position for the shareholders. Malta offers an attractive corporate tax regime whereby shareholders may recover a substantial part of the corporate tax paid by the operational company.
Further information of the corporate tax treatment of Maltese companies can be found here.