VAT and Gambling – An Evolving Landscape

Malta based gambling operators witnessed several VAT changes over the years starting with the 2015 EU wide introduction of the special rules relating to supplies of electronically supplied services’ (‘ESS’) and the 2018 changes to the domestic application and interpretation of the gambling VAT exemption as well as the introduction of VAT Grouping rules in the same year.

Further VAT changes likely to impact gambling operators loom on the horizon. On 5^th April 2022, the European Council agreed to the introduction of Council Directive 2022/542 – the Reduced VAT Rates Directive. One of the changes that will be brought about by this Directive relates to VAT treatment of services falling under Article 54 of the EU VAT Directive.

Article 54 of the EU VAT Directive deals with supplies of services relating to cultural, artistic, sporting, scientific, educational, entertainment or similar activities when provided to non-business customers (‘B2C’).  VAT on such services is chargeable where the activity takes place. Therefore, if for example an event physically takes place in Malta, Maltese VAT rules should be applied to income derived from such event. The new Directive deals with a grey area in those cases where activities are streamed or made virtually available. In such cases, as from 1^st January 2025, the place of supply of activities that are streamed or made virtually available will be where the non-business customer receiving the service is based.

Currently, to determine the place where VAT ought to be charged, gambling operators distinguish between electronically supplied services (‘ESS’)¹ and otherwise. ESS attract VAT in the Member State where the player is based. Other offerings that do not qualify as ESS generally attract VAT of the place in where the supplier is based.

With the introduction of the new Directive, certain offerings which qualify as entertainment activities streamed or made virtually available to non-business customers provided by gambling operators will attracting VAT of the Member State where the player is based.  

In anticipation for these changes, it is advisable for gambling operators to analyse their offerings to determine which offerings may be captured by these rules and to determine how these rules could impact their VAT compliance obligations across the EU and what changes they may need to implement to their systems to be able to collect the relevant information to fulfil their VAT obligations.

¹Defined as services which are delivered over the Internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology.