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Malta: E-Commerce



The government has a project to implement an e-government system in the country within the next few years. Amongst other features, the e-government project is expected to provide the facility to effect all payments of taxes and licenses through an online system with the use of credit cards.

In early 2005, Malta's Parliamentary Secretary, Tonio Fenech launched a new online tax return submission system for individual taxpayers in the jurisdiction.

According to Mr Fenech, individuals will now be able to submit their income tax forms online, make any pending tax payments over the internet, and view up to date information regarding their Tax Statement and Tax Return Statement.

Meanwhile, the e-Malta Commission had been officially launched. Its main task is to educate the Maltese population, commercial sector and industry about the electronic revolution. Malta has invested heavily in information technology both at government level and in the private sector over the last few years.

The Malta Financial Services Centre (MFSC) is said to be considering a strategy to put Malta on the map as one of Europe's major online financial centres with the facility to enable Malta to become the first dedicated centre for electronic payments in the world. The first measures that the MFSC proposes involve steps to boost the economy and create high quality employment for professionals. There is a particular shortage of software and IT support engineers and the MFSC has highlighted the need for a 'digital strategy' to double the country's current number of graduates within the IT sector over the next ten years and continue to develop its online training programmes for school leavers and the unemployed. According to the MFSC the percentage of Maltese with degrees in computer studies is a mere 2.1 per cent compared to 5 per cent in the UK.

The MFSC also explains that there are 'fundamental problems' that must be tackled such as increasing the university's small number of computer laboratories - currently there are only 3 labs with 20 workstations each. It states: 'The organisational structure of the university means that there is insufficient forward planning of resources to meet the demands of government economic initiatives.'

Reports in May, 2003, suggested that there was growing interest from the United States online gaming industy in setting up Maltese based operations. Chairman of the Lotteries and Gaming authority Alfred Muscat said while no formal approaches had yet been made by US gaming firms to his department, he thought it would not be long before they happened.

The Malta Lotteries and Gaming Authority published new regulations in April, 2004. An applicant for an e-gaming license must be a limited liability company registered in Malta and with a physical presence in the jurisdiction, and prospective licensees will be expected to pass a fit and proper persons test, in addition to satisfying a number of other regulations preventing fraud and money laundering.

In June, WorldMatch became the first firm to gain an online gaming licence in Malta. Describing itself as an innovative concept in the online gaming industry, WorldMatch will give the likes of casino operators, airline companies, cruise liners and internet portals access to the gaming sector without any commitment in terms of management, technology, finance or legal matters. The firm has so far agreed six contracts. Alessandro Fried, the general director of WorldMatch explained at a press conference that Malta was chosen as the company’s base due to its recent accession to the European Union, and the island’s strong legal framework

"Gaming is a very delicate and sensitive business which cannot but be treated with respect and a high sense of ethics, observed Mr Fried. "Instead of closing their eyes to the reality of gaming, in Malta they came up with a serious piece of legislation," he added. The launch ceremony was attended by senior members of the government including Parliamentary Secretary Tonio Fenech and the chairman of the Maltese Gaming Authority, Joe Zammit Maempel.

In September, 2005, Zeturf, a Malta-licensed online gaming operator, said it would appeal against the decision by a French court to prevent it from offering gaming services via the internet to the French market.

Zeturf offers its gaming services through servers in Malta, but it was successfully argued in court that a French company, Pari Mutuel Urbain (PMU) has, since the 1930s, enjoyed the exclusive right to organise betting activities on horse races in France.

The case is of particular significance to Malta, says George M. Mangion of PKF Malta. Malta too had offered a seven-year monopoly to a lottery operator, thus temporarily preventing competitors from operating on Maltese turf.

As a rule, EU member states operate an open policy that shuns monopolies, but the rules on freedom of services are complex and sometimes tortuous. It all hinges on the individual member state's desire to protect its local monopolies from unbridled competition.

Despite Zeturf's appeal, says Mr Mangion, the court's decision thus far may have serious repercussions on other foreign online operators involved in cross-border activities.

'In line with the praxis of international jurisprudence, once Zeturf is a Malta-registered company, the execution of the decision meted by the French courts must be acquiesced by a Maltese court. But at this stage one may ask, is it legal for a French citizen to place bets on a foreign registered gaming website?

'Websites offering paying bets are not licensed in France. There are no licences for remote gambling operations. Indeed, prohibitions of online gambling are common in Europe. In Norway, parliament has taken steps to ban Norwegians from gambling online with foreign companies. In a case in Italy last year, the Italian Supreme Court ruled that Italy's restrictive gambling policies were consistent with its obligations under current European Law. The court ruled that gaming restrictions were justified to protect public order.

'In the Zeturf case in the French court it was argued that the Malta based-bookmaker seemed to be conducting its horse racing bets using a PMU database. This led to the protest by PMU on the alleged abuse of its intellectual property and rights rather than on the prohibition exercised by a state monopoly to inhibit cross-border gambling services.

'In its decision, the court took the view that Zeturf by accepting online bets without PMU prior authorisation had inflicted an illicit disturbance to PMU.

'It is curious to note that the French court also ordered the Malta-based ISP to sever the power supply to Zeturf. One may argue that all things being equal the French court has no jurisdiction over an ISP in another country.

'The case should ruffle a few feathers among the lobbyists of the single market. It is a moot point, whether the strategies being employed by the French monopoly lay bare a genuine desire to bring about a diminution of gambling opportunities to protect its citizens. However, in the light of recent cases in Holland and Germany, it would seem that a state which actively seeks to stimulate demand for gambling products, would have some difficulty justifying its national gaming restrictions, were it called upon to do so by the European Commission.

'Ewout Keuleers, an attorney at Brussels who has discussed the case, says that it is only "a question of time" before the restrictions to cross-border online gambling faced a growing number of legal challenges. Indeed, the European Court, in a November 2003 judgment (the Gambelli case) stated, that public interest considerations may justify limitations on the free movement of services, providing the objectives to be achieved were not disproportionate to the restrictions imposed.

'But the veil of hypocrisy ought to be lifted. There is ample evidence that most of the member states do not have as their central objective the restriction of gambling opportunities but the swelling of treasury coffers.

'The developments in this case are very important for Malta, an emerging online gaming centre of repute. It may well be that the sweet aroma of its success in attracting quality operators has percolated in the taste buds of other member states leaving a spasm of envy. But that is the rule of the game. It should be a level playing field where states can compete for inward foreign investment based on a well formulated and regulatory regime.'

In June 2011, the European Court of Justice (ECJ) ruled that a monopoly in an EU Member State can only be justified if findings prove that gambling related problems actually exist and a particularly high level of consumer protection is granted.

In October, 2005, Betfair announced the launch of its new operation in Malta, enabling the pioneering firm to offer its peer to peer poker games over the internet.

"Exchange poker, our first product to be hosted here in Malta, is already proving to be a great success with our customers. We expect to launch other games products from Malta in the near future," stated Steve Ives, director of Betfair Games.

By August, 2007 letters of intent had been issued to 76 companies, and 36 applications to operate in Malta were still pending. This is in addition to the 84 e-gaming companies already licenced to operate from Malta.

The rush of applications from e-gaming firms to register in Malta was prompted by the UK government's announcement that only companies based in territories on its so-called 'white list' are able to market their services in the UK from September 1, when the Gambling Act 2005 came into force. It has been estimated that this could effectively ban one thousand firms from advertising in the UK.

To gain a place on the UK white list, countries must meet stringent new standards which are designed to stop children gambling, protect vulnerable people, keep games fair and keep out crime. Countries in the European Economic Area (EEA), which includes Malta, are automatically accepted, and so far, the Isle of Man and Alderney are the only non-EEA territories to have made the white list.

Malta, it seems, is clearly a favoured jurisdiction. The Lotteries and Gaming Authority issued a statement informing all potential remote gaming licensees that due to an unexpected increase in the number of applications received for new licences, the Authority was not in a position to guarantee the processing of new applications within the normal time-frames.

The influx of e-gaming companies will also benefit the government, which stands to raise substantial revenue in taxation and license fees, Mario Galea, chief executive of the Lotteries Gaming Authority, told the Times. However, he added that the real benefits won't be felt in Malta until these firms actually transfer their physical operations to the island.

Malta Enterprise, the government body responsible for promoting investment, trade and enterprise development, showcased a handful of its successful outsourcing companies at the UK’s premier outsourcing event – Outsource World – in May 2007, at the Business Design Centre, London. Participating in the event were:

  • 2i, an independent QA and test lab with vast experience in Software Quality Assurance and Software development, offering outsourcing professional services related to all aspects of the field for software and computer hardware development companies, with focus on functional testing, localisation testing and QA. Customers include Tele2, Intelcon, Market Dynamics Inc, KPMG, AON, Malta Maritime Authority, Government of Malta.
  • Ascent Software, an established near shore software development provider with experience in the retail, billing, insurance, finance and postal verticals. In addition Ascent also offers a number of special services including optimisation techniques, genetic algorithms and fuzzy logic controls. Organisations benefiting from Ascent’s solutions include Abacus Billing, Body Shop, Dunstan Thomas, Practical Finance and Malta Post.
  • Relevant newcomer Bizfront provides IT outsourcing, based on highly skilled and experienced resources, focused on achieving excellence. Their customer base is growing with projects for e-government, healthcare, banking and the manufacturing industry underway.

In his speech during the IGaming Seminar in October 2009, Tonio Fenech, appointed Malta's Minister of Finance, said that the government's long-term strategy had been successful and was bearing fruit. He explained that the Lotteries and Gaming Authority had processed over 500 applications for remote gaming licenses and that the industry contributed significantly to job creation.

In June, 2010, Malta disagreed with the conclusions of an EU Competitiveness Council meeting which adopted a definition of illegal gambling as: “gambling in which operators do not comply with the national law of the country where services are offered, provided those national laws are in compliance with EU treaty principles".

Meanwhile, European Commissioner Michel Barnier announced the issue of a Green Paper to consult on internet gambling regulation and by December 2010, all 27 member-states agreed to develop cross-border solutions to online gambling and gave their backing to the Green Paper. The Paper attempts to gain an insight on how individual member countries deal with issues arising from online gambling such as best practices to tackle fraud and money-laundering, studies into problem gambling and establishing whether online gambling has a clear legal standing following numerous decisions by the European Court of Justice and national courts. Instead of attempting to introduce Europe-wide legislation, Barnier's paper is designed to construct a legal framework within the EU.

Malta, which has developed a highly successful electronic gaming industry, has taken note of some recent European Court of Justice rulings that apparently support attempts to restrict Europe-wide regulation in favour of local monopolies, and of national legislation which appears to contravene the principles of the freedom of services, such as that in force in France, and fears that it may suffer if a new, illiberal regime is voted through based on the Green Paper.

Malta joined the EU in 2004, and became the first EU member state to regulate internet gaming in May 2004 with its Remote Gaming Regulations under the Lotteries and Other Games Act 2001. Malta has subsequently attracted more than 250 remote gaming companies and issued over 350 licences. These businesses employ about 5,200 people in Malta, and service around 10% of the world's internet gaming market. They generated tax revenues for the government of EUR26.9m in 2008 and EUR52.5m in 2009.

The Maltese government says that the Competitiveness Council's definition does not properly take into account that Malta has a very advanced regulatory regime in full compliance with EU legislation.



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