Remote Gaming – Article by Hugh Peralta & Associates – Advocates

Malta is fast becoming one of the major hubs for the licensing and setting up of online gaming and betting companies. Apart from the favorable legal conditions, Malta ’s success is also attributable to state of the art infrastructure including good Internet connectivity and capacity, competitive hosting service providers and a sizeable skilled workforce trained in game risk management, odds compilation and call centre support, and a multitude of professional services companies which now specialise in remote gaming.

 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.

 The Remote Gaming Regulations, issued under the said Act, 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

 All operators of remote gaming in or from Malta must possess a valid licence of the relevant class. Applicants must satisfy relevant criteria amongst other things they must be  limited liability companies registered in Malta, must satisfy the fit and proper persons test, demonstrate business and technical ability to carry out the operation and demonstrate that the operation is covered by sufficient reserves or securities and is solvent to ensure player winnings and deposit returns.

 There are four classes of gaming licence, issued for a period of 5 year and renewable thereafter:

 Class 1:  For operators managing their own risk on repetitive games.  This class includes casino type games, and online lotteries;

 Class 2:  For operators managing their own risk on events based on a matchbook.  This class includes fixed odds betting, pool betting and spread betting;

 Class 3:  For operators taking a commission from promoting and /or betting games. This class includes Poker networks, P2P, skill games, betting exchange and game portals;

 Class 4:  To host and manage remote gaming operators, excluding the licensee himself.  This class includes software vendors that want to provide management and hosting facilities on their platform.

 Licensing Fees include a one-time non-refundable application fee of €2,300 and an annual fee of €7,000 in the case of classes one to three.  In the case of class four the license fee is NIL for the first 6 months,  €2,300 per month for the second 6 months and €4,600 per month thereafter.

Main conditions for the granting of a License 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.

 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.

 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.

 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: 

 Class One: €7,000 per month;

Class Two:  fixed odd bettings: 0.5% on the gross amount of bets accepted; pool betting: 0.5% on the aggregate of stakes paid.  Approved by LGA to certify the licensee according to remote gaming regulations;

Class Three:  tax is 5% of real income. Real Income is defined as net revenue less direct costs (bonuses, affiliate commissions and payment provider fees);

Class Four:  NIL tax.

Class One under class Four: the gaming tax payable by the Class 1 is €1,200 per month. The gaming tax payable by the host platform is NIL. However the host platform (Class 4) pays a licence fee which after the first twelve months of operation is €4,600 per month (see licensing fees).

 There is a tax capping mechanism which limits the gaming tax payable annually by any one licensee to a maximum of €466,000.

 Corporate Vehicle for Remote Gaming Operations

 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. Utilising the full imputation system with the refund mechanism available under the Malta’s taxation regime, shareholders of a Malta

Licensed Gaming Company can obtain significant refunds of tax paid at company level. Such refunds can provide an effective corporate tax rate of approximately 5%.

For further information, kindly contact 77 Great Estates on (00356) 2125 2455; (00356) 9944 7444; skype: info.77GreatEstates or info@77GreatEstates.com.

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