Watch: How global tax shifts are reshaping the gaming industry
As digital economies grow, the intersection of tax law and the gaming industry has become a hotbed of legal transformation. In a recent episode of SiGMA podcast, host Dr. Franklin Cachia reunites with long time colleague Timmy Borg Olivier, Senior Manager at Deloitte Malta, to dive deep into how global tax reforms, particularly the OECD’s BEPS (Base Erosion and Profit Shifting) initiatives are reshaping the landscape.
Malta’s tax appeal and BEPS
Malta has long been attractive to gaming companies, “It’s very attractive because of the refund system whereby the shareholder gets 30% back so effectively 5% tax,” Franklin notes. However, that landscape has evolved significantly since the OECD’s BEPS project launched.
Timmy highlights how the 2015 BEPS reports shifted not just policy but also perception. “The BEPS project… has changed the international tax landscape quite drastically, if not for anything else for the shift in mindset,” he explains. As jurisdictions adopt stricter anti avoidance laws, Malta has had to follow suit, incorporating new measures like controlled foreign corporation (CFC) rules and anti hybrid rules.
One of the most significant changes is the introduction of formal transfer pricing rules in Malta. Although not new in concept, these rules now require greater transparency and documentation. “We’re living in a reality where now because Malta has those transfer pricing rules, we need to start thinking about the local transfer pricing position,” says Timmy.
Pillar One
Perhaps the most transformative element of BEPS is the proposed implementation of Pillar One, which aims to address taxation in the digital age. As Timmy explains, “We have large multinational enterprises deriving a lot of value from jurisdictions without paying tax… because they don’t need physical presence.”
Pillar One seeks to allocate tax rights to the countries where users are located, crucial for gaming companies offering online services worldwide. It includes two components: Amount A (residual profits) and Amount B (routine functions), aiming to balance taxing rights fairly across jurisdictions.
Though Malta has not implemented a digital services tax (DST), Timmy warns operators should still take note. “Depending on where your customers may be, there may be digital service taxes… very relevant for gaming companies.”
Pillar Two
Pillar Two, the global minimum tax rate of 15% for multinational enterprises, has already seen traction. Timmy points out, “15 is the new zero,” indicating a baseline shift in international tax norms. Though Malta currently benefits from a derogation delaying implementation until 2029, its effective 5% tax rate places it below the OECD’s target. This puts pressure on multinational gaming companies with revenues above €750 million to prepare for top up taxes levied in other jurisdictions.
A complex future
Whether through anti abuse measures, transfer pricing scrutiny or minimum tax rates, gaming operators face an increasingly intricate regulatory environment.
Timmy concludes, “It would be wrong to say that Pillar Two is not going to be relevant… The impact is there, it’s real, and it’s current.” With digital gaming spreading across borders and jurisdictions like Brazil and the U.S. adding regulatory layers, tax compliance is no longer a choice, it’s a business imperative.
As the international gaming industry continues to evolve under the pressure of global tax reforms, staying informed is more critical than ever. Don’t miss the opportunity to dive deeper into these issues at SiGMA Euro-Med taking place in Malta this September, where top legal and gaming experts will unpack the real world impact of Pillar One, Pillar Two and beyond.
