New VAT Guidelines for Gambling and Betting Services

On the 21 November 2017 the Commissioner for Revenue published guidelines on what constitutes ‘supplies related to gambling’ as per Item 9 of Part Two of the Fifth Schedule to the VAT Act and also on the determination of the taxable value of gambling and betting services.

Item 9 of Part Two of the Fifth Schedule lists the following as an exempt without credit supply: “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”. Prior to the issuance of these Guidelines there was no clarity as to what constitutes ‘other supplies related to gambling as may be approved by the Minister’ – these guidelines now shed some light of what falls within these ‘other supplies’.

With effect from 1 January 2018, ‘other supplies related to gambling’ are the following:

1. 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.

2. 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;

3. The granting of the right to participate in a bingo game;

4. 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

5. 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.

Any gambling and betting services which are not included in the above list will not fall within the VAT exemption and will be considered to be taxable supplies, which will be chargeable in accordance with the Place of Supply Rules as amended in 2015. Suppliers of such services would need to ensure that they are registered for VAT purpose under Article 10, which would result in them having a right to claim input VAT in accordance with the Tenth Schedule to the VAT Act.

The Commissioner for Revenue also issued separate guidelines on the determination of the taxable value of gambling and betting services, for the purposes of article 18 and the Seventh Schedule of the VAT Act, which are not exempt from VAT pursuant to Item 9 of Part Two of the Fifth Schedule.

In accordance with Item 1 of the Seventh Schedule of the VAT Act the ‘taxable value’ shall be “the total value of the consideration paid or payable to the supplier by the purchaser, the customer or any other person for the supply, including any subsidy directly linked to the provision of that supply, but excluding the value added tax chargeable under this Act on that supply”.

These guidelines clarify that the term ‘consideration’ for the purposes of determining the taxable value of gambling and betting services shall be construed as follows:

1. 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.

2. 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.

In view of the particular nature of gambling and betting services the Commissioner for Revenue will allow a periodic determination of the taxable value which shall be determined on the last day of a given tax period.

The guidelines also clarify the fact that a person who makes supplies of gambling and betting services which are not exempt from VAT is not required to issue a fiscal receipt in terms of article 51 of the Thirteenth Schedule to the VAT Act.

Nicky Gouder
Partner
ARQ Group

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