VAT Exemption on Gambling Activities: What Changes from 1 October 2026 and Why It Matters for Gaming Operators

Vat Exemption on Gambling Activities: What Changes from 1st October 2026 and Why it Matters for Gaming Operators

With effect from 1 October 2026, Malta will significantly narrow the scope of the VAT exemption applicable to gambling activities. While the VAT Act continues to exempt “betting, lotteries and other forms of gambling”, the new Ministerial approval framework and guidelines issued in April 2026 fundamentally change which activities actually qualify for exemption.

In substance, the changes represent a policy-driven restriction of the exemption, bringing a wider range of remote gambling activities firmly within the scope of VAT.

For many Malta-licensed remote and online gaming operators, this represents a further shift away from VAT-exempt treatment, with potentially material implications for the VAT treatment of supplies, input VAT recovery, and overall margin calculations.

This article explains what has changed, what remains exempt, and where operators should be focusing their attention ahead of 1 October 2026.

The legal trigger: what changed in the VAT law

Legal Notice 86 of 2026 amended Item 9 of Part Two of the Fifth Schedule to the VAT Act, with effect from 1 October 2026, replacing the previous wording with the following formulation:

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

This amendment aligns the wording of the Maltese VAT Act with Article 135(1)(i) of the EU VAT Directive, which provides for an exemption for gambling activities subject to conditions and limitations laid down by each Member State.

On its own, this wording appears neutral. However, the substantive change lies in the new Guidelines issued by the Commissioner for Tax and Customs on 2 April 2026, which explicitly identify which forms of gambling are approved by the Minister for exemption purposes, and, by implication, which are not. These guidelines replace and supersede the current gambling VAT guidance with effect from 1 October 2026.

Before vs after: a clear shift in VAT treatment

The shift is best understood by comparing the practical VAT treatment before and after 1 October 2026.

Position up to 30 September 2026

Since 2018, Malta has not operated a fully exempt gambling VAT regime. Instead, the sector has been subject to a mixed VAT treatment depending on the nature of the activity.

In broad terms:

• Online RNG casino games were brought within the scope of Maltese VAT
• Player-versus-player platforms (for example, poker rooms generating commission or rake) were also treated as taxable
• Other activities, most notably sportsbook betting and online live casino, continued, in practice, to be treated as exempt without credit under the applicable guidelines

Operators were therefore already required to segment activities, apply different VAT treatments, and manage partial attribution where relevant.

Position from 1 October 2026

From 1 October 2026, the exemption becomes deliberately narrow and activity-specific, based on Ministerial approval as reflected in the new guidelines.

Only the following gambling activities are approved and therefore exempt without credit for Maltese VAT purposes:

• Low risk games, as defined in the Fifth Schedule to the Gaming Authorisations Regulations (S.L. 583.05)
• Occasional junket events, subject to approval and provided they are not organised on a routine basis
• Facilities for gambling on the outcome of a real-life sporting event, where access is strictly physical and limited to the place where the event itself takes place

Gambling activities falling outside these categories are expected, in most cases, to fall outside the exemption.

The practical reality: what changes for remote gambling

For gaming operators, the most important consequence is this:

Remote gambling activities that were previously treated as exempt, in particular sportsbook and online live casino, are likely, in most cases, to fall outside the scope of the VAT exemption from 1 October 2026.

By contrast:

• Online RNG casino and player-versus-player platforms were already subject to VAT and remain so
• The principal change therefore concerns remote betting and live casino offerings, which are no longer supported by Ministerial approval under the new framework

This represents a material extension of VATable gambling activity, rather than a holistic redesign of the system.

Interaction with electronically supplied services (ESS)

The revised gambling exemption framework also brings renewed focus on the classification of gambling services as electronically supplied services (ESS) for VAT purposes.

From an operator perspective, this is no longer a purely technical distinction, it directly affects where VAT is due and how margins are impacted.

A service qualifies as an electronically supplied service where it is:

• supplied over the internet or an electronic network;
• essentially automated; and
• involves minimal human intervention.

Under the Maltese ESS guidelines, the offering of facilities for placing bets has historically been treated as falling outside the scope of ESS. However, this analysis is fact-specific and depends on how the service operates in practice.

As the scope of the gambling exemption narrows, the ESS classification becomes increasingly relevant:

• Certain sportsbook activities may continue to fall outside ESS where there is meaningful human intervention (for example in odds-setting or operational decision-making)
• Other betting formats or platform models may satisfy the ESS criteria, particularly where processes are highly automated

This assessment may differ across products, platforms and operating models.

VAT impact of ESS classification

The ESS analysis has direct VAT consequences:

• ESS supplies
  • Place of supply follows the customer’s location
  • Where the customer is outside Malta, VAT falls outside Malta
  • Full input VAT recovery may be available, subject to normal limitations

• Non-ESS taxable supplies
  • Place of supply is Malta (for Malta-established operators)
  • Revenue is treated as inclusive of Maltese VAT
  • Full input VAT recovery may be available

The distinction therefore affects where VAT applies and how it impacts margin calculations, rather than whether VAT applies.

From irrecoverable VAT to potential recovery

One of the more commercially significant implications of the revised framework is the potential shift in VAT recovery profiles.

Historically, exempt gambling activities without credit have resulted in irrecoverable input VAT. A narrowing of the exemption may, in certain cases, bring activities within the scope of VAT, enabling recovery of input VAT on associated costs.

This creates a dual dynamic:

• Increased VAT exposure on certain supplies; and
• Improved recovery potential on operational and technology costs

In practice, this means that VAT may become a direct cost embedded within gaming margins.

The overall impact will depend on each operator’s business model, cost base and customer profile.

Grey areas and risk flags for operators

While the revised framework is more targeted, several practical risk areas remain.

1. Hybrid or mixed models
   Operators combining physical, event-based gambling with remote or digital elements may face partial exemption, requiring careful supply-by-supply analysis.
2. “Occasional” junket events
   The exemption is limited to non-routine events. Structured or recurring programmes may fall outside scope.
3. VAT recovery dynamics
   Approved gambling activities remain exempt without credit. Operators expanding their VATable footprint will need to reassess attribution methodologies and recovery ratios.
4. Margin and revenue impact
   Operators will need to assess how VAT interacts with gaming-specific metrics, including gross gaming revenue (GGR), bonuses, jackpots and pricing models.
5. Platform structuring and supply fragmentation
   Operators may need to reassess whether different elements of their platform constitute separate supplies for VAT purposes, particularly where exempt and taxable activities are closely integrated.

What operators should be doing now

With the effective date set for 1 October 2026, gaming operators should already be undertaking a structured review of their VAT position.

Key areas to focus on include:

• Mapping gambling activities against the newly approved exemption categories
• Identifying revenue streams that are likely to become VATable
• Reassessing ESS versus non-ESS classification at product level
• Stress-testing margin models to reflect VAT becoming embedded in additional revenue streams

For many operators, this is not a marginal adjustment, but a structural shift in VAT treatment and profitability modelling.

Final thoughts

The 2026 changes should be viewed as a deliberate shift in Malta’s VAT policy for the gaming sector.

The key impact of the revised framework is a tightening of the exemption in practical terms. While the underlying legal mechanism remains unchanged, the range of activities that qualify for exemption has been significantly reduced.

As a result, a wider proportion of gambling activities, particularly in online gambling models, are likely to fall within the scope of VAT.

Operators who do not reassess their VAT position at a granular level risk both unintended VAT exposure and missed recovery opportunities.

Early and proactive review will be essential as the new framework takes effect.

How AE Can Help

At AE, we assist gaming operators in navigating the evolving VAT landscape with clarity and confidence. Our team provides practical guidance on how the revised gambling VAT exemption applies to different products and business models, helping clients map their activities against the new Ministerial approval framework.

We support operators in identifying revenue streams that may become VATable, assessing the classification of services (including electronically supplied services), and analysing the resulting impact on place of supply, margins, and pricing structures. We also advise on input VAT recovery methodologies, helping businesses optimise their recovery position while remaining fully compliant.

From reviewing platform structures and supply flows to implementing VAT-efficient operating models, we work closely with tax, finance, and operational teams to ensure alignment across the business. Whether you are reassessing your VAT position or preparing for the 1 October 2026 changes, AE offers the technical expertise and hands-on support needed to manage risk and identify opportunities within the new framework.