Tax-Treaty Positions for iGaming Operators: Where Double-Tax Relief Actually Works

Treaty benefits for iGaming operators are narrowing. The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI), developed under BEPS Action 15 and now signed by over 100 jurisdictions, has modified thousands of bilateral treaties to incorporate anti-avoidance provisions that directly affect the royalty flows, intercompany finance arrangements, and licensing structures that underpin most iGaming group architectures. Operators and their advisers who built treaty positions before 2017 need to reassess those positions against the current post-MLI network, the Pillar Two global minimum tax, and the transfer pricing enforcement environment shaped by the 2022 OECD Transfer Pricing Guidelines.

This article sets out the treaty-position analysis compliance officers and tax counsel need to run across three recurring problem areas: permanent establishment risk for B2B platform providers, withholding tax on royalties and interest, and the interaction between treaty shopping limitations and Pillar Two. It is not a substitute for jurisdiction-specific legal advice, and the treaty network is bilateral by nature, so any position must be verified against the specific covered tax agreement in force between the relevant pair of jurisdictions.

How the OECD Model Tax Convention Allocates Taxing Rights

The OECD Model Tax Convention on Income and on Capital forms the basis of the bilateral treaty network used by OECD member countries and a substantial number of non-member countries. Its core logic is residence-based taxation of business profits, with source-country taxation available only where a non-resident enterprise operates through a permanent establishment (PE) in the source country, as set out in Article 5 and Article 7 of the Model Convention. For passive income streams (dividends, interest, royalties), specific articles impose ceiling withholding rates that modify the source country’s domestic withholding entitlement, with Article 12 governing royalties and Article 11 governing interest.

As the OECD Transfer Pricing Guidelines (2022 edition) state, these principles serve the dual objectives of securing the appropriate tax base in each jurisdiction and avoiding double taxation, thereby minimising conflict between tax administrations and promoting international trade and investment. For iGaming, the conflict typically arises along two fault lines: whether a group entity has a PE in a market-access jurisdiction, and whether royalties paid across borders to an IP holding entity attract treaty-reduced withholding or the full domestic rate.

Permanent Establishment Risk for B2B Platform Providers

Does serving a market create a taxable presence?

A B2B platform provider supplying technology, content aggregation, or risk management services to operators licensed in market-access jurisdictions (the UK, Ontario, Sweden, Spain) faces PE risk when its activities in those jurisdictions cross the threshold set by Article 5 of the OECD Model Convention. A PE exists where there is a fixed place of business through which the enterprise carries on its business. The Canada Revenue Agency’s published guidance defines a fixed place of business to include an office, branch, or any place where substantial machinery or equipment is used, and extends the concept to employees or agents with the authority to contract on behalf of the enterprise.

For B2B iGaming providers, four fact patterns generate the most exposure. A localisation or integration team based permanently in London or Madrid may constitute a fixed-place PE if it performs functions beyond preparatory or auxiliary activities. A server cluster hosted in a licensed jurisdiction and used to process real-money transactions is more arguable, but tax authorities in several jurisdictions have sought to characterise dedicated gaming servers as fixed places of business where they support the core revenue-generating activity rather than merely data storage. A dependent-agent arrangement, where an affiliated entity in the market-access jurisdiction habitually concludes contracts on behalf of the B2B supplier, creates a PE under Article 5(5) of the Model Convention without any fixed physical premises. And a technical operations hub that manages live game feeds, odds feeds, or real-time risk monitoring for players in that jurisdiction sits in a materially different position to a back-office support function.

Double taxation means the inclusion of the same income in the tax base by more than one tax administration, when either the income is in the hands of different taxpayers (economic double taxation, for associated enterprises) or the income is in the hands of the same juridical entity (juridical double taxation, for permanent establishments).

Where a PE is found to exist, Article 7 attributes to it the profits it would have made as a functionally independent enterprise performing the same or similar functions using the same or similar assets under the same or similar conditions. This requires a two-step analysis: first delineating the PE’s activities by reference to functions, assets, and risks, then pricing those activities at arm’s length against the head office and other group members. The OECD Transfer Pricing Guidelines confirm that corresponding adjustments under Article 9(2) and the mutual agreement procedure under Article 25 are both available where PE attribution creates economic double taxation, but only if the taxpayer acts within the time limits specified by the relevant bilateral treaty and domestic law.

Withholding Tax on Royalties: Article 12 and the Transfer Pricing Boundary

Most iGaming groups generate significant royalty flows from the licensing of software, brands, and proprietary data from an IP-holding entity (typically in Malta, Gibraltar, or the Isle of Man) to operating companies in market-access jurisdictions. Those flows attract withholding tax in the source country at rates set by domestic law, reduced under treaty to the Article 12 ceiling rate in the applicable bilateral agreement. Treaty networks vary: many EU bilateral treaties reduce royalty withholding to zero between member states, treaties with Canada, Australia, or Latin American jurisdictions commonly retain rates of 10 to 25 percent at source.

A critical boundary exists between the Article 12 characterisation of a payment as a royalty and the transfer pricing analysis of the same payment under Chapter VI of the OECD Transfer Pricing Guidelines. The 2014 BEPS Actions 8-10 guidance on intangibles makes this explicit: the manner in which a transaction is characterised for transfer pricing purposes has no relevance to whether a particular payment constitutes a royalty or may be subjected to withholding tax under Article 12. The Article 12 definition of royalties, which covers payments for the use of, or the right to use, copyright, patents, trademarks, secret formulas, or industrial, commercial, or scientific equipment, must be applied under the treaty itself and the relevant Commentary. Separately, transfer pricing rules determine whether the amount of that royalty is arm’s length, regardless of its Article 12 classification.

The practical implication is that a payment may be correctly characterised as a royalty under Article 12 (attracting treaty-reduced withholding) while being challenged as excessive or non-arm’s-length under transfer pricing rules. Both analyses run concurrently. An operator that successfully reduces withholding tax to zero under an EU bilateral treaty may simultaneously face a transfer pricing adjustment that re-attributes profit from the IP holding entity back to the economic activity conducted in the market-access jurisdiction, effectively reversing the intended tax result through a different mechanism.

BEPS Action 6 and the MLI: Treaty Shopping After the Principal Purpose Test

Does the principal purpose test apply to our treaty position?

BEPS Action 6 addressed the abuse of bilateral treaties through treaty shopping, where a taxpayer interposes an entity in a third jurisdiction solely or primarily to access treaty benefits that would otherwise be unavailable. The minimum standard agreed under Action 6 requires bilateral treaties to include either a limitation on benefits (LOB) clause, a principal purpose test (PPT), or a combination of both. The OECD’s 2014 BEPS deliverables confirmed that treaty shopping and other forms of treaty abuse would be addressed through this mechanism, and the MLI implemented that standard across covered tax agreements for the jurisdictions that signed and ratified it.

The PPT, incorporated as Article 7 of the MLI, denies a treaty benefit where it is reasonable to conclude that obtaining the benefit was one of the principal purposes of an arrangement or transaction, unless granting the benefit is consistent with the object and purpose of the relevant treaty provision. The test is objective but facts-driven: tax authorities assess the overall arrangement, not merely the legal form of the entity claiming the benefit. For iGaming groups, the treaty-shopping risk is most acute where an IP holding entity in a favourable treaty jurisdiction (Malta, the Netherlands, Luxembourg) has been established primarily to reduce withholding tax on royalties flowing from market-access jurisdictions, with minimal commercial substance in the holding jurisdiction.

KPMG’s analysis of the BEPS 2.0 framework confirms that a signing ceremony for the Multilateral Instrument implementing the Subject to Tax Rule (STTR) occurred in September 2024, with nine jurisdictions signing at that stage. The STTR adds an additional layer of complexity for iGaming IP structures: it allows source countries to impose additional taxation on certain payments (including royalties) where those payments are subject to a nominal effective tax rate below a specified threshold in the recipient jurisdiction, even where the bilateral treaty would otherwise assign taxing rights to the residence state.

Operators should assess any existing treaty position against three questions. Does the MLI apply to the specific bilateral treaty in question (depending on both contracting states having signed, ratified, and included the treaty as a covered tax agreement)? If so, does the PPT apply to the relevant treaty provision being claimed? And, if the PPT applies, can the taxpayer demonstrate that obtaining the treaty benefit was not one of the principal purposes of the arrangement, or that granting the benefit is consistent with the treaty’s object and purpose? Where the answer to the third question requires factual substantiation of substance, the same substance analysis required for Pillar Two (discussed below) will be relevant.

Intercompany Finance: Interest Withholding and Thin Capitalisation

Intercompany debt in iGaming group structures commonly takes the form of shareholder loans from a parent or treasury entity to operating subsidiaries, with interest flowing upward to a jurisdiction with a favourable treaty network. Article 11 of the OECD Model Convention sets the ceiling withholding rate on interest, which many bilateral treaties reduce to five or ten percent, or to zero within EU member states under the Interest and Royalties Directive regime (where applicable and not withdrawn by the UK’s post-Brexit position).

The OECD Transfer Pricing Guidelines address the construction of intercompany debt arrangements directly. Where a secondary adjustment is made to an intercompany pricing arrangement, tax administrations may impute a constructive loan with an arm’s length interest rate. As the 2022 Guidelines note, any withholding tax then imposed on that constructive loan arrangement may not be relievable because there may not be a deemed receipt under the domestic legislation of the other jurisdiction. This creates a residual double-taxation exposure on secondary adjustments that cannot be fully remedied through treaty mechanisms, because the treaty’s withholding reduction applies to actual payments, not to constructive amounts recharacterised on audit.

Thin capitalisation rules in market-access jurisdictions, the UK’s Corporate Interest Restriction, Germany’s interest cap, Spain’s thin-cap provisions under the Impuesto de Sociedades, and Canada’s interest deduction limitations, impose a separate constraint. Where domestic rules deny a deduction for interest paid to an associated enterprise, the economic result is double taxation of the same income stream regardless of whether the applicable bilateral treaty reduces withholding. MAP under Article 25 is the correct relief mechanism, but the treaty must include an Article 25(2) provision (or equivalent) and the taxpayer must file within the applicable time limit, which varies by treaty.

Mutual Agreement Procedure: The Double-Tax Relief Mechanism That Actually Works

When should an iGaming operator file a MAP request?

Where double taxation arises from a transfer pricing adjustment, from conflicting PE determinations between two jurisdictions, or from conflicting characterisation of a payment, Article 25 of the OECD Model Tax Convention provides the mechanism for competent authorities to resolve the conflict by mutual agreement. The OECD Transfer Pricing Guidelines (2022) confirm that Article 25 is intended to be used by competent authorities to resolve not only interpretation disputes but also the elimination of double taxation in cases not otherwise provided for in the Convention, including corresponding adjustment requests under Article 9(2).

MAP is a minimum standard under BEPS Action 14. Members of the BEPS Inclusive Framework committed to ensuring that MAP processes are available to taxpayers, that they produce timely and principled resolutions, and that competent authorities are notified of MAP requests whether filed with the authority of the jurisdiction making the adjustment or with the other contracting state. The commitment at element 3.1 of the Action 14 minimum standard requires either an amendment to Article 25(1) permitting MAP requests to be made to the competent authority of either contracting state, or a bilateral notification or consultation process where the competent authority receiving the case does not consider the taxpayer’s objection to be justified.

For iGaming operators, MAP is most valuable in three scenarios: where a host-country transfer pricing audit re-attributes platform or IP profits to a market-access PE in a manner that creates taxable income already taxed in the residence jurisdiction, where two jurisdictions characterise the same entity differently (as a PE in one and a separate resident entity in the other); and where a secondary adjustment generates deemed interest income with a withholding tax that the other jurisdiction will not credit. MAP should be initiated promptly, because relief under Article 9(2) may be unavailable if the time limit provided by treaty or domestic law for corresponding adjustments has expired. Some treaties set a three-year limit from the date of notification of the assessment, others are open-ended under domestic law but time-limited under treaty override provisions.

Pillar Two GloBE Rules: The Framework That Overrides Treaty Planning

The GloBE rules under Pillar Two impose a minimum effective tax rate of 15% on the income of in-scope MNE groups in each jurisdiction where they operate. The threshold for in-scope status is consolidated group revenue exceeding EUR 750 million. As KPMG’s BEPS 2.0 analysis confirms, Pillar Two rules are now in effect in over 50 jurisdictions as of the beginning of 2025, with further jurisdictions indicating an intention to introduce the rules. The European Commission published an EU Directive to incorporate Pillar Two into EU law, which expanded scope to include wholly domestic groups within the EU and certain other modifications to the OECD Model Rules.

For iGaming operators above the EUR 750 million threshold, treaty planning that successfully reduces withholding tax on royalties does not eliminate GloBE exposure. The GloBE rules apply a standardised income base and definition of covered taxes at the jurisdictional level. Where the resulting effective tax rate (ETR) falls below 15%, the rules impose a coordinated top-up tax that brings the MNE group’s tax on excess profits in that jurisdiction up to the minimum rate. The top-up tax is collected first by the local jurisdiction through a Qualified Domestic Minimum Top-up Tax (QDMTT), then by the parent jurisdiction under the Income Inclusion Rule (IIR), and finally, as a backstop, through the Undertaxed Profits Rule (UTPR) applied in the jurisdictions of fellow group members.

The substance-based income exclusion (SBIE) reduces the profit base subject to top-up tax by excluding a fixed return on substantive activities in the jurisdiction. The carve-out applies at 10% of payroll costs and 8% of the net book value of tangible assets during the transition period, with both percentages declining to 5% by 2033. For asset-light, IP-intensive iGaming groups with minimal payroll and tangible-asset bases in their licensing jurisdictions, the SBIE carve-out is structurally limited. A Malta-based IP holding entity with five employees and no significant tangible assets will generate a small SBIE offset, leaving the bulk of royalty income exposed to the GloBE calculation if the Maltese ETR falls below 15%.

For iGaming operators, which are typically asset-light and IP-intensive, the substance carve-out is likely to be limited relative to profits, making top-up tax exposure a live risk in any jurisdiction where the statutory rate is below 15% or where effective rates are compressed by incentives.

Malta’s corporate tax regime, which features a shareholder refund mechanism that can materially reduce the effective rate for non-resident shareholders, has been a subject of scrutiny in this context. The MGA’s licensing framework does not address Pillar Two interaction, and operators cannot look to gaming-specific regulatory guidance for resolution of GloBE compliance questions. Compliance teams at large MGA-licensed groups need to model GloBE ETR positions using the jurisdictional methodology set out in the Model Rules and the four rounds of Administrative Guidance published between February 2023 and June 2024.

Jurisdiction Comparison: Where Treaty Relief Holds and Where It Does Not

The table below summarises the treaty-position risk profile across the four iGaming hub jurisdictions most commonly used for IP holding and platform-service entities. Compliance officers should treat this as a framework for structuring the analysis, not as a definitive legal opinion. Treaty networks are bilateral and specific bilateral provisions must be verified for each pair of jurisdictions.

Hub Jurisdiction	Treaty Network Quality	MLI / PPT Exposure	GloBE ETR Risk	PE Risk Level for B2B Platforms
Malta (MGA)	Extensive (70+ treaties, EU IR Directive)	High, Malta signed MLI, PPT in covered tax agreements	Medium-high, refund mechanism can compress ETR below 15% for non-residents	Medium, functional analysis required for EU market teams
Gibraltar (GRA)	Limited (no standalone EU treaty access post-Brexit)	Medium, MLI signatory, UK-Gibraltar relationship post-Brexit creates treaty gaps	Medium, 10% corporate rate below 15% GloBE floor, QDMTT not implemented as of 2024	High, post-Brexit PE risk in UK for Gibraltar entities serving UK players
Isle of Man (GSC)	Limited (UK Crown Dependency, few standalone treaties)	Low exposure, limited treaty network means fewer treaty benefits to deny	High, 0% corporate rate creates near-certain GloBE top-up liability, QDMTT status must be verified	High, UK parent-subsidiary structures likely to generate UK PE for IoM operating entities
Curaçao (GCB/LOK)	Very limited (Netherlands Antilles treaty heritage, fragmented post-dissolution)	Low exposure, very limited treaty network means PPT rarely triggered	High, low local tax rates likely produce ETR below 15%; QDMTT status under LOK 2024 regime unconfirmed	Medium, remote B2B delivery with no local staff reduces fixed-place risk, dependent-agent risk still present

For operators considering the MGA as a licensing base, a detailed cost and regulatory comparison with the UKGC is available in our analysis of which licence actually costs more to maintain in 2026, which addresses gaming tax architecture including Remote Gaming Duty and Malta’s gaming-tax VAT treatment. The Curaçao LOK transition framework covers the post-2024 regulatory regime relevant to treaty and tax analysis for that jurisdiction.

Operational Compliance: What a Defensible Treaty Position Requires

A defensible treaty position in the post-MLI, post-Pillar-Two environment requires four components operating together. Substance documentation must demonstrate that the entity claiming treaty benefits has genuine commercial substance in its jurisdiction of residence: real decision-making, key personnel with appropriate seniority, adequate economic capital, and DEMPE functions (development, enhancement, maintenance, protection, and exploitation) performed locally with respect to any IP that generates royalties. The BEPS Actions 8-10 intangibles guidance makes clear that legal ownership of an intangible, without performance of the relevant DEMPE functions, does not entitle the legal owner to the economic returns from that intangible under transfer pricing rules.

Transfer pricing documentation must be contemporaneous and benchmarked. The OECD Transfer Pricing Guidelines’ arm’s length principle requires that controlled transactions are priced consistently with what independent enterprises would agree under comparable circumstances. For iGaming royalty flows, the lack of publicly available comparables for gambling software licensing rates makes benchmarking challenging, and compliance teams should expect detailed scrutiny on the comparability analysis, particularly where the royalty rate is high relative to the operating company’s profitability. Country-by-country reporting (CbCR) under BEPS Action 13 provides tax authorities with a group-wide view of where profits are reported relative to where economic activity occurs, flagging mismatches that trigger further inquiry.

MAP readiness requires that the taxpayer’s tax function tracks which bilateral treaties apply to each intercompany flow, whether those treaties are covered tax agreements under the MLI, whether the PPT has been triggered, and what the time limits are for filing MAP in each relevant jurisdiction. Letting a transfer pricing assessment go uncontested beyond the domestic time limit can extinguish the right to corresponding relief in the other jurisdiction, crystallising double taxation that would otherwise have been eliminable through MAP.

GloBE modelling requires a jurisdictional ETR calculation for every constituent entity in each jurisdiction where the group has operations. The PwC Pillar Two Data Input Catalog (January 2025) sets out the data points required for this calculation, including covered taxes per constituent entity, GloBE income or loss per entity, tangible assets and payroll per jurisdiction, and the allocation of taxes including those arising under CFC regimes and withholding. For fiscal years commencing from January 2026, the transitional blended CFC methodology that applied to entities such as those subject to the US GILTI regime no longer applies, and the full June 2024 guidance methodology applies instead.

Key Resources

OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (2022), the primary reference for arm’s length pricing, corresponding adjustments, and MAP procedure. Available at oecd.org/tax/transfer-pricing.

OECD Guidance on Transfer Pricing Aspects of Intangibles (BEPS Actions 8-10, 2014), governs the allocation of returns from intangibles including gambling software, brands, and proprietary data. Available at oecd.org/tax/beps.

OECD Pillar Two GloBE Rules Fact Sheets and Minimum Tax Implementation Handbook (2023), the operational reference for calculating jurisdictional ETR, substance-based income exclusion, and QDMTT/IIR/UTPR collection mechanics. Available at oecd.org/tax/beps.

BEPS Action 6 Final Report (2015) and MLI (BEPS Action 15), the source of the principal purpose test and limitation on benefits provisions now incorporated into covered tax agreements. OECD MLI tracker available at oecd.org/tax/treaties.

KPMG BEPS 2.0: Pillar One and Pillar Two, practitioner reference for implementation tracking, GloBE Administrative Guidance rounds, and STTR MLI signing developments. Available at kpmg.com.