Two peas in a pod | KPMG | Malta

Two peas in a pod

Two peas in a pod

Russell Mifsud highlights the significance of the iGaming industry in Malta and how the market is set to evolve.

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Associate Director, Gaming

KPMG in Malta

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Published on eGaming Review Roundtable May 2016

EGR: What types of innovation can we expect to see develop within the next five years?

Russell Mifsud (RM): If we consider steady innovation, then the evolution of mobile betting over the past few years is an area that must be put on a pedestal. This focus will continue to flourish and challenge the manner and perception through which we interact with our mobile devices.

For engagement purposes, Virtual Reality has been hitting the headlines across sectors. Although there is still a long way to go to fine tune the offering and embrace its inevitable potential, 2016 has already significant movement inRM: 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, whereupon the OECD issued the final package of reports with its recommendations for changes to the international tax system as a result of the 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.

The distinction between the online gambling industry and that of the video games industry is also becoming blurred and a bridge is finally forming. Millennials expect immersive gameplay and this is often provided for through refined graphics, game design and an enticing story line, all of which is expertly crafted from the video games market. The rise of eSports and Daily fantasy sports are a clear indicator that the demand to be able to influence an outcome through human response, is an underlying element that the new generation of gamblers are demanding. It is the evolution of games and the means through which new audiences, outside that of the typical gambler profile, can be won over.

EGR: What has contributed to Malta’s success as an igaming hub?

RM: In 2016, it’s hard to imagine Malta without igaming. The industry has become a fundamental part of our economic structure over the past 10 years or so. Industry stakeholders estimate that the sector today contributes 12% to Malta’s overall GDP. And we are part of a wider boom. Global and European demand for remote gaming products and services remains on a strong growth trajectory across market and product ranges. Industry players and decision makers understand its significance to the economy as a whole, resulting in a strong commitment to this sector.

EGR: When it comes to tax advice to igaming companies in Malta, what are the primary concerns of these companies?

RM: 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, whereupon the OECD issued the final package of reports with its recommendations for changes to the international tax system as a result of the 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.

EGR: What does industry consolidation mean for Malta-based operators?

RM: With operators facing increasing regulatory, compliance and operational costs, M&A activity in the igaming sphere is set to continue to increase globally.

Furthermore, operators and practitioners involved in international M&As, are beginning to pay more attention to what Malta can offer them. Malta is perceived as a flexible and efficient jurisdiction for M&As, due to its attractive corporate law and regulatory environment, as well as the advantageous fiscal treatment of locally registered companies which are used as vehicles for cross-border acquisitions. The fact that Malta has got many profitable, small to mid-sized operators based on the island, makes the island an interesting catalogue for acquirers.

© 2017 KPMG, a Malta civil partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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