New guidelines issued by the VAT Department to determine the taxable value of gambling and betting services

The VAT Department has on the 21st November 2017, issued new guidelines, on the determination of the taxable value of gambling and betting services, that fall within the scope of article 4 of the VAT Act and which are not exempt in terms of item 9 of Part 2 of the 5th Schedule of the Value Added […]

Written By ACT Team

On December 4, 2017
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The VAT Department has on the 21st November 2017, issued new guidelines, on the determination of the taxable value of gambling and betting services, that fall within the scope of article 4 of the VAT Act and which are not exempt in terms of item 9 of Part 2 of the 5th Schedule of the Value Added Tax Act.   The new guidelines apply with effect from 1st January 2018

Consideration 

For the purposes of determining the taxable value of gambling and betting services, the term “consideration” shall be construed as follows:

(i) 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 VAT.

(ii) 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). The consideration shall be deemed to be inclusive of the VAT. 

Exclusions

(i) Any amount of the commission or fee received by a supplier, or of the stakes/bets placed by the player, in relation to supplies which fall within the scope of article 4 of the Value Added Tax Act, which is immediately allocated by the supplier to a jackpot pool is to be deducted for the purposes of determining the taxable value.

(ii) Bonuses and other incentives which are provided by the supplier are considered to constitute a rebate or price reduction allowed by the supplier to the customer, and as such should be excluded from the taxable value of the supply when such bonuses have been included within the consideration received by the supplier, by the aggregation of the amount of that bonus to the winnings and other amounts paid out to players in connection with that bet.

Periodic determination of the taxable value

In principle, the taxable value of a supply is to be determined on a transaction per transaction basis. However, the VAT Department acknowledges the particular nature of gambling and betting services, and the practical difficulties that could arise in the application of this principle. The taxable value of the gambling and betting services shall be determined on the last day of a given tax period, by reference to the aggregate taxable value of transactions during that tax period.

Thus:

(i) Where the supplier receives a commission or participation fee, the taxable value shall be the overall result of the commissions or fees from supplies generated during a VAT period, less any allowed deductions for that same period; 

(ii) In all other cases, the taxable value shall be the revenue of the supplier determined as above derived from supplies generated during a VAT period, less any permitted deductions for that same period, as determined above.

Should, in a given VAT period, the taxable value result in a negative figure, that negative amount shall be carried forward to the subsequent VAT period or periods in succession and offset against the taxable value as determined for the subsequent VAT period or periods in succession. A negative figure does not entitle the supplier to any refund of, or adjustment to, output VAT paid, or reported, in any prior period.

Fiscal receipts

A person who makes supplies of gambling and betting services is exempt from the obligation to issue fiscal receipts.

How can we help?  

For further information, please contact one of the firm’s tax partners, Stephen Balzan on [email protected] or Elaine Camilleri [email protected]. ACT can help you understand the changes to the tax rules and how these can impact your business.  

Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria.  For an appointment in our Gozo office, please call on 00356 21378672 or send us an email on [email protected].