Effective 1 October 2026

Legal Notice 86 of 2026, substitutes item 9 of Part Two of the Fifth Schedule to the Value Added Tax Act (Cap. 406) with effect from 1 October 2026. The amendment significantly narrows the VAT exemption without credit available to the gambling sector.

Previously, the exemption covered:

• "Government lotto and lotteries, the supply of agency services related thereto, and such other supplies related to gambling as may be approved by the Minister."

From 1 October 2026, the exemption applies only to:

• "Betting, lotteries and other forms of gambling, as may be approved by the Minister."

Alongside the Legal Notice, the Commissioner for Tax and Customs (CfTC) issued guidelines under article 75(2) of the VAT Act on the supplies approved for the exemption, on the place of supply of streamed and virtual activities, and on electronically supplied services (ESS).

Under the new guidelines, the Minister has approved the following supplies for the exemption from 1 October 2026, i.e. they remain exempt without credit:

• Low risk games, as defined in the Fifth Schedule to the Gaming Authorisations Regulations (S.L. 583.05).
• Junket events requiring approval under S.L. 583.05, held on occasional basis (not routinely organised and requiring specific planning due to their scale and nature).
• Facilities for gambling on the outcome of a real-life sporting event or competition, which facilities can only be physically accessed at the place where the event physically takes place.

Supplies falling outside these categories will no longer benefit from the exemption from 1 October 2026 and will, in principle, be taxable.

The change is not only about output VAT. Operators whose supplies were previously wholly exempt, with no right to deduct input VAT, may now make taxable supplies, which could give rise to partial or full input VAT recovery on related costs.

Place of Supply of Streamed and Virtual Activities

Under item 6(2)(a) of Part Two of the Third Schedule to the VAT Act, cultural, artistic, sporting, scientific, educational, entertainment and similar services supplied to a non-taxable person are generally taxed where the activity actually takes place.

Where the activity is streamed or otherwise made virtually available, however, the place of supply is where the customer is established, has a permanent address or usually resides.

The guidelines clarify the following:

• In-person activities: Activities organised for in-person participation follow the general rule, even if occasionally streamed.
• Hybrid participation: Where the customer's choice is unknown at invoicing, the general rule applies, unless attendance proves to virtual, in which case the invoice must be corrected.
• Reduced rates: Streamed activities shall only qualify for any reduced rate applicable to those events or activities if held physically in accordance with the Eighth Schedule to the VAT Act if live streamed. Pre-recorded content does not qualify, and mixed bundles qualify only if live streaming is predominant.

Live casino services are confirmed as an activity similar to entertainment for the purposes of item 6(2)(a). This applies where casino-type games are run in real time by a physical dealer or presenter operating a gaming device in a studio or casino environment, and all of the following conditions are met:

• the game is transmitted to players via live audio-visual streaming over the internet;
• players participate remotely through an electronic interface that allows them to place bets;
• player actions are processed and transmitted to the dealer or presenter, either through an intermediary system or by direct interaction; and
• the outcome is determined by the execution of the game and communicated to players in real time.

Live casino is a streamed activity, so B2C supplies are taxed where the player is established, has a permanent address or usually resides. Maltese VAT would therefore apply only to players who are established, have their permanent address or usually reside in Malta. For players in other EU Member States, VAT would be due in the player's Member State.

Updated Electronically Supplied Services (ESS) Guidelines

The updated ESS guidelines restate the conditions in article 7 of Council Implementing Regulation (EU) No 282/2011: the service must be delivered over the internet or an electronic network, be essentially automated with minimal human intervention, and be impossible to ensure without information technology.

The following gambling services are now expressly listed as ESS:

• Online betting: Facilities for placing bets online on any event, live or otherwise, where bet placement and processing are essentially automated.
• RNG casino and poker: Online access to random number generator games, against the house or remote players, where the process is fully automated.
• Online bingo: System-generated or streamed bingo where selections are made electronically and winners identified automatically.

The guidelines also state that offering a facility for internet gambling in connection with the streaming of a live casino event is not an ESS.

The classification of these services as ESS is significant from a place of supply perspective. Where ESS are supplied to non-taxable persons (B2C), the place of supply is the place where the customer is established, has a permanent address or usually resides. Operators may therefore be liable to account for VAT in the Member State where the customer is established, rather than in Malta. They should consider whether to register under the One-Stop Shop (OSS) scheme.

Who is Affected?

• Gambling and betting operators - Most supplies will no longer be exempt from 1 October 2026. This means that they will now be considered as taxable and now have a right to deduct input VAT.
• Businesses supplying streamed or virtual activities to non-taxable persons (B2C) may now therefore be liable to account for VAT in the member state where the customer is established under the new ESS guidelines.

Businesses supplying services only to taxable persons (B2B) are generally subject to the general B2B place of supply rules, and none of the above apply.