The Sports Industry has rapidly developed over the past decade and in turn plays a significant role on a worldwide economic scale. Therefore, within the last couple of years, emphasis has been given to the regulation of such industry, and its relationship with other areas of law, namely Gaming law, Intellectual Property law and ICT law in Malta. Chetcuti Cauchi’s Media & Entertainment Law Team provides various services directed at sports personalities, the setting up of sports related businesses, as well as providing avant-garde sports law advice.
Sports Law and Intellectual Property Law
The technology used in the creation of sports equipment is protected legally to ensure the safeguarding of design rights, trademark law as well as copyright. When considering such sports equipment as intellectual property, it can be argued that the law provides a foundation for the licensing of merchandise agreements, sponsorships, media and broadcasting. By regulating such areas, support is given to the development of the sports industry as well as the protection of the image of sportspersons.
Gaming in Sports Law
Sports betting and eSports have proven to be quite popular in Malta, where Malta’s license reputability attracts large investors such as Bet365- Hillside (New Media Malta) Limited and eSports. Such establishments draw the interest of game publishers, sponsors and entrepreneurs which invest in gamers taking eSports as a profession. Since this area is unregulated, there have been cases of abuse resulting from the lack of contractual stability, lack of clarity of relevant rights and obligations of the parties involved or problems arising from disciplinary matters. Therefore, efforts are being made nationally and internationally to avoid the manipulation of sports events and competitions and maintain the integrity of sports and sports betting. In 2014, Malta’s Lotteries and Gaming Authority entered into a collaborative Memorandum of Understanding with FIFA for those particular reasons. The European Union has dedicated a work plan between 2014-2017 focused on identifying sports betting risks and introducing practices to prevent them. Malta does not intend on incorporating the initiatives of this Work Plan into national law, but rather will present a Bill tackling sports corruption before Parliament by the end of 2017.
Online Gaming and Sports Law
Fantasy sports have become rather popular, where virtual teams of players of a professional sport compete based on the statistical performance of chosen professional players in actual games. Legal Notice 271 of 2016 has regulated this practice and has held that Malta fantasy sport games operators do not require a gaming license to operate, there need only send notification of their operations to the Malta Gaming Authority (MGA). This legislation applies to betting based on the accumulation of statistical results of performance of several individuals, and not on the forecast of an occurrence or score. This allows Malta to act as a preferred destination for fantasy sports with a straightforward legal framework within EU jurisdiction. The MGA has issued Skill Games Regulations within the Lotteries & Other Games Act, which also focus on the regulation of fantasy sports.
Tax System for Professional Sports People
Article 17 of The OECD Model Convention holds that a resident within a contracting state who earns income as an entertainer from his personal activities, which are exercised in another contracting state may be taxed in that other state. Therefore, professional sportsman who are not residents in Malta may benefit from the tax opportunities in Malta, if it is the case that the income of the sports professional is received in Malta or routed through Malta in the form of royalties.
Under Article 12(1)(c)(i) of the Income Tax Act, royalties derived by the sportsperson would be exempt from Maltese tax if the person is a non-resident and does not engage in any trade or business in Malta through a permanent establishment in the same basis year.
Although any income derived from a Maltese company is subject to a corporate tax rate of 35%, a double tax relief can be claimed, allowing a refund to be possible, depending on whether the royalty income is active or passive. If a non-resident profits from a Maltese Company, the tax rate would be 10% in the case of passive royalties. With regards to dividend distribution from a Maltese company, the shareholder can claim a tax refund of 5/7ths of the tax credited to the shareholder. Shareholders of IP holding companies with passive interest benefit from a refund of 25% of the 35% tax rate.
If on the other hand, an IP company was not incorporated under Maltese law, but has shifted its management to Malta, it is exempt from tax on royalties arising outside Malta, provided they are not received in Malta. Once they are remitted to Malta, the royalties are held to be taxable income.
Although Malta does not levy any withholding tax on outbound royalty payments and dividends, Malta has entered into various double tax treaties, reducing the rate of such tax on royalties paid to a Maltese IP Company. This is evident in the double tax treaties with Barbados, Croatia, Denmark, Iceland, Spain and Sweden, where 0% withholding tax for royalties is pay to a Maltese company. Special royalty payments from associated companies resident in EU Member States are not subject to withholding tax in Malta, provided the relevant conditions are fulfilled.
The normal tax rate will apply if a sportsman is resident in Malta. A high income earning individual is subject to the highest personal income tax, 35%. As part of Malta’s tax incentive in the sector, Article 56(26) of the Income Tax Act holds that an individual who derives his income from a full time/part time sports activity, either as a registered player/athlete or as a licensed coach shall be taxed at the income tax rate of €0.075 on every euro.
Our Malta Sports Law Practice
Chetcuti Cauchi’s Sports Law team offers various services aimed at providing a multi-faceted approach when offering sports law advice to businesses which are interested in setting up an establishment in this sector in Malta. Our advisory services are also aimed at:
- drafting, revising and negotiating contracts;
- providing taxation advice;
- dispute resolution through arbitration, mediation, negotiation or court proceedings; and,
- reaching agreements and negotiations with sports agents, managers and agencies.
Our team also deals specifically with sports personalities, handling issues related to reputation management, protection of privacy, taking up residence, personal tax advice, dispute resolution, image rights, sponsorship rights, broadcasting issues and associated contract work.
