Greentube, Novomatic and Financial Maneuvering

At first glance, Greentube Malta Limited appears to be a standard subsidiary of a major gambling company. However, a closer look at its financials reveals a complex web of intra-group transactions, revenue movements and corporate structuring that raises several questions.

A particularly perplexing element is its money transfers between Malta and Austria, which do not align with standard tax efficiency principles. These transactions, combined with Novomatic’s broader corporate structure, suggest strategic financial decisions that merit scrutiny, particularly in light of Malta’s Bill 55 and Novomatic’s ongoing legal risks in multiple jurisdictions.

Fund Transfers between Malta and Austria

Typically, corporations aim to shift profits to low-tax jurisdictions to optimize tax efficiency. However, Greentube Malta Limited appears to be doing the opposite. In 2023, it transferred approximately €83.2 million in revenue share to its Austrian parent, Greentube GmbH.

Given Malta’s tax refund system, which allows for effective tax rates as low as 5%, moving such sums to Austria, where corporate tax is 25%, seems counterintuitive from a purely tax-driven perspective.

The rationale behind these transactions likely relates to the ownership structure. Novomatic, Greentube’s ultimate parent, is controlled by two Austrian private foundations: JFG Privatstiftung (holding 75.1% of Novo Invest GmbH) and VZZZ Privatstiftung.

These foundations are subject to different tax treatments, paying only 12.5% on retained earnings. This arrangement may facilitate an alternative tax strategy while also managing corporate risk.

A Shift in Strategy?

Greentube Malta Limited’s financial trajectory has been declining, with operating profits falling from €1.2 million in 2022 to just €165,790 in 2023. Profit before tax also dropped significantly to €33,937. Despite still reporting a net profit, the trend indicates diminishing returns.

Furthermore, the company has substantial provisions for litigation, suggesting mounting legal disputes, particularly in Germany.

In May 2023, Novomatic established GREENTUBE BETTING MALTA LTD (C 105293), wholly owned by Greentube GmbH. The new entity, managed by the same directors Antonello Cuschieri and Adam Warren.

Given the ongoing legal claims against Greentube Malta Limited and the recent fine of £1,000,000 imposed on Greentube Alderney Limited, restructuring could provide a strategic means to reduce exposure to liabilities.

With Greentube Malta Limited’s financial performance stagnating and significant sums being funneled to Austria, the possibility of winding down its operations in favor of a new entity cannot be ignored. A shift to GREENTUBE BETTING MALTA LTD, which currently has modest share capital (€200,000), could allow Novomatic to maintain a presence in Malta while mitigating future risks associated with litigation and regulatory enforcement.

Intercompany Transactions and Regulatory Scrutiny

Greentube Malta Limited’s reliance on transactions with its parent and sister companies is substantial. While intra-group transactions are standard in multinational corporations, the scale at which funds are moved between Greentube Malta and its Austrian parent raises questions about the true nature of its operations.

If not structured carefully, such financial flows may attract regulatory scrutiny regarding their purpose and economic substance.

Another noteworthy aspect is Novomatic’s 2022 acquisition of Admiral Sport S.r.l. from Novomatic Italia S.p.A. The transaction, valued at €34.7 million, was funded by a capital injection of €35 million from Greentube GmbH in Austria.

Following the sale, Admiral Sport S.r.l. transitioned from an Italian-registered entity to a Maltese gambling company, making it subject to Malta’s legal framework, including Bill 55. This law effectively blocks the enforcement of foreign court rulings against Maltese gaming operators, potentially shielding Admiral Sport S.r.l. from legal actions in Italy.

If this restructuring was intended to limit regulatory exposure rather than serve a purely operational purpose, it could raise concerns among authorities.

Novomatic’s Tax and Risk Strategy

In typical tax-efficient corporate structures, profits flow toward jurisdictions with lower tax rates. The decision to transfer €83.2 million from Malta to Austria, where corporate tax is significantly higher, suggests a different strategic priority. Given that Novomatic’s controlling private foundations are taxed at a lower rate on retained earnings, the financial flows may serve broader asset management goals rather than conventional tax optimization.

This approach also aligns with potential liability shielding. By keeping minimal profits in Greentube Malta Limited, the company could be positioned for an eventual wind-down, while significant earnings are already secured within Austria’s legal framework.

This may become increasingly relevant if legal challenges intensify, particularly concerning Bill 55 and cross-border gambling regulations.

Potential Regulatory Risks and Future Implications

For now, Novomatic’s structuring remains functional. Greentube Malta Limited moves funds through its corporate network, Admiral Sport benefits from Malta’s legal protections and profits are consolidated within Austria’s private foundations.

However, several factors could disrupt this model:

• If Germany, Italy, or EU authorities apply pressure to repeal Bill 55, Greentube Malta Limited may become exposed to legal claims it currently avoids.
• Austrian tax authorities may scrutinize the rationale behind the substantial revenue share payments to Greentube GmbH.
• Regulators could examine Novomatic’s foundation structure to determine whether the financial flows primarily serve tax minimization or liability shielding.

While Novomatic’s financial maneuvers may comply with existing regulations, they operate within a complex legal and tax environment. Any shift in regulatory scrutiny, tax policy or legal enforcement could significantly impact the sustainability of its current approach.

For now, however, the flow of money continues uninterrupted.

FAQs

What is Greentube Malta Limited?
Greentube Malta Limited is a subsidiary of Novomatic, operating within the iGaming industry with a complex financial structure.

Why is Greentube Malta transferring funds to Austria?
The company transferred €83.2 million to its Austrian parent, potentially for tax and asset management strategies rather than pure tax efficiency.

How does Malta’s Bill 55 impact Greentube Malta?
Bill 55 protects Maltese gaming operators from foreign legal claims, potentially shielding Greentube Malta from regulatory risks abroad.

What are the tax implications of Greentube Malta’s fund transfers?
Despite Malta’s 5% effective tax rate, funds are moved to Austria, where Novomatic’s private foundations benefit from lower tax on retained earnings.

Is Greentube Malta’s financial decline a concern?
Yes, its operating profits dropped significantly in 2023, signaling potential restructuring or strategic shifts within Novomatic’s corporate structure.

What role does GREENTUBE BETTING MALTA LTD play?
This new entity, created in 2023, may serve as an alternative structure for Novomatic, possibly mitigating regulatory and financial risks.

Why is Novomatic restructuring its gambling operations?
Novomatic appears to be reorganizing to manage litigation risks, optimize tax efficiency, and ensure compliance with evolving regulations.

How do intra-group transactions affect regulatory scrutiny?
Large-scale financial movements between Greentube Malta and Austria may attract regulatory attention regarding their economic substance and purpose.

What is Admiral Sport S.r.l.’s significance in this strategy?
Novomatic’s acquisition of Admiral Sport S.r.l. and its shift to Malta aligns with Bill 55 protections, reducing exposure to Italian legal claims.

Could regulatory changes impact Novomatic’s strategy?
Yes, increased scrutiny from EU authorities or changes in Maltese and Austrian tax laws could challenge the sustainability of its financial approach.