Olga Finkel, Partner, has recently published an article in the Country Profiler, Gaming Malta Yearbook 2015 entitled: Setting up your gaming business in Malta.  The article addresses the aspects of why Malta is the ideal place to set up here, together with the advantages and process from a company’s point of view.  Olga also discusses the regulatory implications of potential mergers and acquisitions as well as tax, banking accounting aspects.

“Quite often, when enquiring about relocating a gaming business to Malta or establishing such business on the island, the promoters focus solely on obtaining information and preparing for the licensing process with the Malta Gaming Authority (MGA). The licence application is, without doubt, a crucial and time-critical process in the business’ endeavours to start operations as soon as possible and, thus, to achieve the shortest time-to-market under the new setup. Nevertheless, considering relocating or starting operations in a new location must always be viewed in a holistic manner, taking into consideration the pros and cons of the jurisdiction, the overall rollout plan and all other aspects of the business setup.

Is Malta still relevant?

In the wake of European regulatory fragmentation where more and more countries setup own compulsory licensing as a pre-requisite for the local market access, the question is often asked whether a licence in Malta has lost its relevance and utility. National authorisation regimes have slowly eroded the relevance of offshore gaming regulatory regimes, as in most Member States it is no longer possible to operate with an offshore licence.

That said, Malta is still experiencing a large volume of incoming licence applications. The jurisdiction is vibrant and operators are still looking at it as an attractive base from where to offer their services. The reasons are multiple. The attractive and efficient business environment is certainly a factor. The increased efficiency and approachability of the regulator is another. However, if I had to single out one main reason why Malta has become relevant, is still relevant and will probably remain relevant is that Malta is not an offshore jurisdiction.

As a full member state of the European Union, Malta is actively involved on the EU level in all initiatives and matters relating to gaming. Malta intervenes in cases before the European Court of Justice, it has a voice in council meetings and it has elected MEPs able to put points across effectively in the various EU institutions. Licences, approvals and authorisations issued in Malta are respected in most other countries, even if they are not fully recognised.

Furthermore, Malta is a wonderful place to relocate to and offers an array of opportunities and facilities. In addition to business benefits summarised below, it also appeals to relocating employees and their families. It has excellent schools, top quality hospitals, it offers unparalleled cultural and entertainment facilities, and it is most of all a safe place for the entire family. As a result of being a hub for many gaming operators, Malta offers well trained, experienced and multi-lingual work force with skill in demand in the gaming industry. This is probably the main reason why many companies are increasing their work-force locally.

Establishing a company

Once a decision is taken to obtain a gaming licence in Malta, the promoters of the business need to establish a corporate vehicle. In Malta, company registration process is fast and straightforward, provided the necessary documentation is prepared and requisite steps are taken. These include establishing the level of the company’s share capital, deciding on the composition of the board of directors and their responsibilities and powers, incorporating these and other matters in the company’s memorandum and articles of association.

While the minimum requirements for gaming regulatory purposes are, in many ways, higher than the minimum from the corporate regulatory aspect, at the company’s incorporation stage it is sufficient, if preferred, to rely on the minimum corporate requirements. Any adjustments may be carried out at a later stage in line with the MGA conditions relevant to the company’s business.

Preparing documentation for the licence application

The preparatory stage of the licence application is extremely important, since the quality and comprehensiveness of documentation have an effect on the time it will take the MGA to process the application. If documentation is imprecise, unclear or incomplete, the MGA will need to ask for clarification and further explanations, which will ultimately prolong the application process.  All documentation, including the due diligence on business promoters and proposed directors, the 3-year detailed business plan, technical setup plan and procedures that the company will follow, should carefully be thought out and presented at this stage.

Banking

Banking arrangement is an important part of any business. The newly established company should seek formalising such arrangements as soon as possible, as opening bank accounts, both for business administrative needs and for holding player funds, require a due diligence process to go through and, therefore, take time. In addition, contracts with desired payment service providers should be established ideally during the gaming licensing stage, as not to cause any delays upon the licence being granted by the MGA.

Tax and accounting matters

As a tax resident in Malta, the new company must register with the tax department and obtain a tax registration number. A Malta operating company may benefit from a number of tax incentives through the application of the Malta tax refund system. In particular, while a company incorporated in Malta would be taxed at the tax rate of 35%, upon dividend distribution the shareholders of the Malta company would be entitled to a tax refund, reducing the tax significantly, in most cases to 5%.  In order for the company’s shareholders to benefit from the tax incentives, it is important for them to register with the tax department.

In certain circumstances the company may also benefit from a duty exemption on the acquisition and transfer of shares by the company and in the company, as well as from a deferral of income tax payment up to 18 months after year end. Filing of requisite documentation with the authorities to enabling the above is an important action that should not be forgotten.

VAT registration

The Malta gaming company may have an obligation to register for VAT purposes in Malta. If such requirement applies, registration should be made within 30 days from the commencement of supplies. One should note that the new VAT legislative changes have taken place to assist Malta-based gaming companies affected by the VAT 2015 changes with respect to B2C supply of gaming and gambling services.

Becoming an employer

Before employing any person, the company must register as an employer and obtain an employer registration number. Each prospective employee will also need to be approved by the MGA and it is advisable for the gaming company to establish a procedure of informing the prospective employees about this requirement and collecting necessary documentation. In addition, for non-EU citizens, the company will require to obtain a single residency/working permit.

Regulatory implications of mergers and acquisitions

Once the gaming business is established in Malta, the owners of the business may seek opportunities to merge the gaming business, sell a holding thereof or acquire a stake in a third party operator in order for the business to continue to grow and mature. When negotiating and structuring such transactions, whether as a seller or a purchaser, it is fundamental to ensure that the operating entity which will continue carrying out the licensed remote gaming activities following the transaction has the necessary approvals from the MGA. In such respect the law states that the affected licensed entity must obtain prior approval from the MGA for every merger, reconstruction or similar transaction and for every prospective holder of at least 5% ownership or control (whether directly or indirectly) of the licensed entity. In view of such requirements, the transactional documentation must necessarily include the MGA approval as a condition precedent to the completion of the transaction. One should also keep in mind that where the transaction is structured as a sale of business asset then in addition to the approval of any new prospective qualifying shareholders of the post-transaction operational entity, the purchaser must ensure that the post-transaction gaming system is covered by the necessary MGA licenses. This may take place either by means of a transfer of the existing licence from the seller (provided prior approval from the MGA is obtained) or via the issue of a new licence from the Authority.”