Understanding the gaming sector’s largest service provider

What makes KPMG so ideally placed to assist the iGaming industry?

KPMG is the largest professional services firm in Malta with over 500 Partners and staff and with over 160,000 professionals worldwide. We provide a wide array of services across most industries and we are particularly well qualified and aptly positioned through our experience, gained over the course of conducting a wide range of engagements for Remote Gaming organisations that recognised the potential and opportunities that Malta offers.

We can draw upon resources from our team of tax, audit and advisory professionals and upon resources within the KPMG international network that have over the years developed the depth of skill and experience required to support organisations with their plans for expansion and who will draw on their own and KPMG’s collective knowledge of best practices to provide the relevant assistance.

KPMG recognises and understands the challenges and opportunities faced by gaming entities, both on the micro level and on the wider global scale. By combining our Gaming industry expertise, our close relationships with industry stakeholders, as well as the reach of our global network, we are in a position to offer a truly professional service across functional and geographical boundaries.

Malta’s success as a gaming hub is attributable to multiple factors. What are the factors which are attracting companies to relocate or start-up their iGaming business in Malta?

Malta’s success as an established gaming jurisdiction is attributable to various factors, which together make Malta an attractive jurisdiction for any gaming operator to conduct its business. Malta’s membership in the European Union places it at an advantageous position when compared to other gaming jurisdictions such as the Isle of Man, Gibraltar and Alderney. The application of common market principles applied by Malta as well as other EU member states and the freedom of movement of both goods and services are viewed as the most fundamental factors.

Apart from its obvious beauty and attractiveness attributable to its strategic location, pleasant lifestyle and warm climate, Malta also offers an array of top-notch professional services including banks and financial services which can be of great aid to gaming operators who decide to invest in Malta. Malta’s workforce is highly skilled, well educated, flexible and reliable. Many foreign investors commend the work ethic of the Maltese who generate high quality work at a fraction of the cost of other European countries.

A strong and highly reputable gaming legal regime makes the Maltese gaming licence a very attractive solution to any operator. The Malta Gaming Authority (MGA) is the body that regulates and is responsible for the governance of any form of gaming in Malta. Besides being the first European regulatory body to regulate online gambling, the MGA’s regulatory regime is both technology neutral and game neutral. 

In 2015, an important project was initiated in order to achieve the MGA’s strategic and policy objectives which witnessed the review and total overhaul of Malta’s Gaming Regulatory Framework and a future-looking governance of all gaming sectors in Malta. The new legislation will also provide for enhanced governance structures and extension of regulatory scope and responsibilities of the Authority.

Malta’s favourable tax regime, especially when compared to other EU countries, has been identified as one of its major competitive advantages. Specific Tax incentives, such as the Tax for Highly Qualified Persons, an effective corporate Tax rate of 5% and a wide array of double taxation treaties with various countries worldwide, put Malta at the pinnacle next to some of the most attractive Tax regimes in the world.

Last but not least, Malta already has a recognised history and vast experience with various top gaming operators in the world such as, Betclic Everest Group, Betfair, Betsson, Tipico and Unibet. In Malta there are over 300 gaming operators who have a licence issued by the MGA and the sector employs over 8,000 employees and contributes about 10% of Malta’s GDP.

The iGaming industry is rapidly evolving in all aspects. What are some of the changes Malta-based iGaming operators are faced with?

New directives, legislation and regulations are the order of the day. Current challenges include BEPS, VAT 2015, the 4th AML Directive, Data Protection, emerging licensable jurisdictions, increased industry consolidation (thus translating into stiffer competition and the need for innovation) and perhaps the less recent UK Point of Consumption tax. 

The ever-increasing costs of compliance are shaving down operators’ profits and growth prospects. These elements are also correlated to the driving force behind the colourful array of Mergers and Acquisitions that have taken place in the Remote Gaming space, which is typically motivated by economies of scale, securing new markets and further armouring an operator’s clout for lobbying purposes.

When it comes to tax advice to the iGaming companies, what are the primary concerns of these companies? 

The online gaming industry has seen substantial changes in recent times as a result of regulatory and fiscal changes. The most recent was announced on 5 October 2015, wherein the OECD issued the final package of reports with its recommendations for changes to the international tax system as a result of the Base Erosion and Profits Shifting (“BEPS”) project. A key concern of the BEPS project is to prevent the granting of treaty and other tax benefits in inappropriate circumstances, particularly in situations where corporate structures and other similar arrangements do not have adequate economic substance to justify their presence in a particular jurisdiction. The OECD has proposed that this is monitored by way of automatic or spontaneous exchange of information between tax authorities.

Many countries have already adopted or are poised to adopt changes to their international tax systems based on the OECD recommendations. While implementation and timing will vary across borders, this final OECD release marks a crucial shift from the recommendation and consultation phase of BEPS to legislation and implementation. For example, from 1 April 2015, the UK government has introduced the Diverted Profits Tax (‘DPT’) to be charged at 25% of the “diverted profits”, which applies to both UK and non-UK companies where the entity or transaction lacks economic substance or where a UK taxable presence is avoided, subject to prescribed threshold.