On the 21st November 2017, the Malta Commissioner for Revenue issued two guideline documents (“the guidelines”) in relation to the current exemption without credit in terms of item 9 of Part Two of the Fifth Schedule to the Value Added Tax Act (“VATA”) on 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. Both guideline documents are effective as from 1 January 2018.
First Guideline Document
Article 135(1) of Council Directive 2006/112/EC of the 28 November 2006 on the common system of VAT provides that Member States shall exempt without a right of deduction of input VAT “betting, lotteries and other forms of gambling, subject to the conditions and limitations laid down by each Member State”.
The guideline document aims to identify those supplies related to gambling which, when supplied in Malta in terms of the rules for the place of supply of services, shall be treated as exempt without credit.
In summary, the provision of any facilities for the placing of bets and wagers, including the services of bookmakers, betting exchanges and equivalent facilities will remain VAT exempt however excluding gambling on the outcome of casino-type table games such as blackjack, poker and roulette as well as any games of chance, the outcome of which is determined by a random generator. Land-based games and tables for the playing of casino-type games of chance including tables for the playing of roulette, blackjack, baccarat, poker when played against the house, and slot machines shall remain VAT exempt, as well as lotteries and bingo games.
Relevant to note is that supplies which are strictly required, related and essential to, and which form part of an underlying gambling or betting transaction shall remain VAT exempt as long as they fall within the gaming services mentioned in the guidelines themselves.
Second Guideline Document
The second set of guidelines seeks to provide guidance on the determination of the taxable value of gambling and betting services which do not fall within the VAT exemption.
In essence, the guideline document provides clarity of what the ‘consideration’ should be for VAT purposes in instances where the gambling supplier receives a commission or a participation fee. It also provides that bonuses and other incentives provided by the gambling supplier should be excluded from the taxable value.
The guideline also provides for a periodic determination of the taxable value and the VAT Department acknowledges the particular nature of gambling and betting services, and the practical difficulties that could arise in determining the taxable value of a supply on a transaction per transaction basis. Hence, the guideline provides that the taxable value of gambling shall be determined on the last day of a given tax period.
NEXIA BT OBSERVATIONS
The shift of certain gambling services to being a vatable supply and no longer VAT exempt should be seen in the context of VAT recoverability, apart from suppliers now having an output VAT to account for. Following the 2015 VAT changes, which have affected suppliers of electronically supplied services (ESS), ESS providers already might have had some right to recover input VAT. Following these guidelines, those gambling operators which supply their ESS services to non-Malta established players might now have an extended right of input VAT recoverability and also possibly a change in their Malta VAT registration type.
The switch to an Article 10 VAT registration type will bring with it new compliance obligations, and if applicable, the right to recover VAT on a partial attribution basis, if the gambling supplier is engaged in both vatable and exempt supplies. VAT registration might be obligatory or optional and hence other considerations linked to such VAT registration must also be considered.
To view the full guidelines as issued by the Malta VAT Department please follow this link.
For further information kindly contact Oliver Zammit | Partner | Tax and International Client Services or Antoinette Scerri | Senior Manager | Tax Advisory Services.