VAT CHANGES 2015: Impact on the Gaming Industry
As of the 1st of January 2015, online gaming operators will need to start reporting their sales to tax authorities in the member states where the player permanently resides by filing the necessary VAT returns. Payment of VAT will need to be made to the tax authorities of each jurisdiction unless the form of betting carried on is covered by an exemption in the legislation of the country of consumption. The VAT exemption does not exist in every jurisdiction and where it exists may not cover all forms of gambling. For instance, Germany exempts sports-betting and lotteries from VAT, however online casino operators do not benefit from a similar exemption.
Therefore, although Maltese VAT legislation maintains a VAT exemption for all forms of wagering carried on by locally licenced operators, such exemption now becomes only relevant when the player is permanently established in Malta. Given that Malta based players account for a minority of all the players registered with a gaming operator, the relevant VAT legislation becomes the legislation of the country in which the consumer is established and therefore gaming operators are now obliged to report their sales to each country where their betting products are consumed, and in particular cases (such as the German case) VAT must be collected from players which tax must then be forwarded to the relevant tax authorities.
The EU Members will be able to decide if the betting, lotteries and other forms of gambling consumed on their territory, remain VAT exempt. So, in 2015, in order to determine where the VAT should be charged, the first thing to do is to know where the customer is located. If that customer resides in a jurisdiction where gambling is no longer VAT exempt, an operator will have to collect VAT from its players and pay VAT there, irrespective of where, in the EU, the operation itself is based.
These changes would require businesses which supply those services to report and pay the VAT in the member state of their customers. The operators can opt for multiple VAT registrations, or alternatively will be able to account for VAT across the EU via a single electronic declaration under the Mini One Stop Shop Scheme.
This change could trigger a lot of costs and a big administrative burden. This is why the mini One Stop Shop (MOSS) comes into force on 1 January 2015. It will allow businesses supplying telecom, broadcasting and e-services to non-business customers within the EU to report and pay all Value Added Tax (VAT) charged and collected on those supplies via a web-portal in the EU Member State in which they are identified for VAT.