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Gambling and Betting License: General Legal Principles
- Index Gambling License
- Gambling LicenCeS And BASIC CONSIDERATIONS FOR SERVICE PROVIDERS
- Gambling License Malta – Gambling License Belize –Gambling License Isle of Man– Costa Rica – England
- Tax planning via a network of international tax advisers and attorneys
- Why form a company in a foreign country with a tax accountant specialized in international tax law?
- Basic Considerations regarding the Formation of Companies in „Zero-Tax Havens“ i.e. in countries that have not entered into Double Taxation Agreements with other countries
- Offshore Company Formation: Tax haven rankings
- Download all Company Information
Gambling and Betting License: General Legal Principles
In many countries, gambling and/or online gambling is banned or the preserve of state bodies. In the field of gambling, the law of the country where the gambling company has its registered office applies, as a matter of principle, and the law of the other “state or states providing the service”. Example: The gambling company has its registered office on the Isle of Man and the gambling service offered is also aimed at clients in Spain, Germany and Switzerland, for example. Consequently, the gambling law of the Isle of Man and the gambling law of Spain, Germany and Switzerland come into play.
However, there are possible solutions through the EU freedom of establishment and judgements of the European Court of Justice concerning the freedom of establishment or “Gambling Judgements” of the European Court of Justice: If a company within the European Union has a gambling licence, its services can be aimed at participants throughout the EU.
Thus, with a licence from Malta, the United Kingdom or Gibraltar gambling can be offered throughout the EU, as the national bans on gambling or gambling regulations would breach the EU freedom to provide services, if a licenced provider of the service were to be prohibited from offering a service in another EU member country (cf. European Court of Justice ruling of 09.09.2010 – C-316/07 inter alia). It must be borne in mind, in this connection, that Gibraltar does not belong to the VAT area of the EU.
Incidentally: The Isle of Man and Alderney are autonomous crown property and not members of the EU.
If what is involved is simply a “reseller service”, Cyprus is an additional possibility, as offering such a service is feasible in Cyprus without a licence.
Moving to a non-member country such as Belize, the Isle of Man or Costa Rica is also possible.
It must be assumed, as a matter of principle that such an “offshore licence” only gives the right to execute the service within the country where the company has its registered office, such as in Belize, for example, but not in other countries and/or in the EU. However, this raises the question as to how other countries will wish to impose sanctions, as these countries, as a rule, do not have any agreement providing for mutual judicial assistance with other states.
Costa Rica adopts a special position: provided that the gambling service is only directed at clients outwith Costa Rica, no gambling licence is required, only a trading permit.
Gambling and Betting License: What preconditions are required to provide proof that the business premises of the gambling company are located in the country where it has its registered office ?
“The location of the senior management of the business” centrally defines the location of the business premises – also on the basis of Article 5 of the double taxation agreement: Either the client or an agent relocates his normal place of residence/abode to the country in which the gambling company has its registered office (that is, to Malta, for example) and appears himself as the director of the gambling company, or our partner legal office in the country where the company has its registered office appoints a trustee director or full-time director. In addition, having a purely “post-office box company” must be prevented. So simply having a “registered office” is, under any circumstances, not sufficient. However, offices do not always have to be large. Actually, within the EU, in most cases, having a virtual office (company sign, your own telephone number, the ability to take calls in person using the name of the company, a fax service) in a business centre is sufficient. Gibraltar is a special case: Due to domestic law, having a business set up and operated in a commercial way has been a requirement for some yearsa now, that is, there must be at least one office and one full-time employee.
Gambling Licences and Tax-Law Aspects
What is also crucial within the context of a gambling company is the prevention of the approval of an illegal intermediate company. Due to the EU freedom of establishment and judgements of the European Court of Justice on the freedom of establishment, this problem can be solved relatively easily within the EU. Unlike when setting up companies in so-called offshore states (countries with low rates of taxation or with a zero tax rate and without a double taxation agreement with the country in which the registered office of the client is located, outside the EU): the approval of an illegal intermediate company can, actually, only be prevented by putting a business operation in place in the country in which the company has its registered office (that is, Belize, the Isle of Man and Costa Rica, for example) that has been set up in a commercial way and the senior management of the business can be proved to be operating from the country in which the company has its registered office, that is, there is a full-time director and not simply a nominee director. Of course, there are appropriate structural possibilities and/or approaches to solving problems.
Fiscal Structural Possibilities
First of all, a so-called gambling or betting tax is due in almost all countries. In addition, the profits of the gambling company are taxed. In Malta, there is the possibility of reducing the final tax rate imposed at company level through the Malta holding company model to 4.75%.
Taxation of Dividends
The profits after tax (dividends) are due to the shareholder/owner of the company. Most countries are familiar, in this connection, with a tax at source in the case of dividends flowing out of the country. Such a tax at source can, in principle, only be limited or cancelled through two measures:
- The country is not familiar with tax at source in the case of dividends flowing abroad (Example: Cyprus)
- An existing double taxation agreement (DTA) limits the tax at source
- The aplication of the EU parent company-subsidiary company directive: collection of the dividends free of tax at source in the case of affiliated companies within the EU
- The interposition of an EU holding company. Cyprus, in particular, is a possibility in this case: Application of the EU parent company-subsidiary company directive (provided that the subsidiary company/gambling company are located within the EU), Cyprus does not tax proceeds that are purely from holdings(holding privilege), and there is no tax at source in the case of the distribution of the dividends to non-Cypriots.
Apart from the tax at source, the dividends are taxed at the recipient of the dividends end in accordance with domestic law. In Germany, for example, at a withholding tax rate of 25%, and in many other countries according to the half-income system. If a double taxation agreement exists between the country of the recipient of the dividends and the country of the base company, and the possibility of using the credit method exists, tax paid at source can be deducted from the tax on dividends.
If, in the case of the dividend recipient, it involves a public limited company, then, in most cases, the dividends are collected tax-free. In addition, in the case of EU companies, the EU parent company-subsidiary company directive comes into play.
Gambling Licences and Services of Our Legal Office
Our legal office offers the entire range of essential services:
- setting-up of the company in the country where it is to have its registered office, that is, in Malta, for example
- on request, and insofar as it is required: appointment of a trustee director or full-time director in the country where the company is to have its registered office and/or a trustee shareholder
- proper place of business in the country where the company is to have its registered office (prevention of the approval of a “post-office box company”)
- opening of a bank account in the name of the company, incl. online banking, cheques and a credit card. The client is given sole authority over the account, even in the case of solutions involving trustees, through a shareholders’ resolution. The shareholders’ resolution is held by the bank and can only be amended with 50+1 votes of the shareholders
- application for a permit (business plan, P&L plan, General Terms and Conditions, institution of licencing process up to and including obtaining the permit)
- insofar as required: co-operation with the “programmer of the gambling platform”
- tax structure e.g. setting-up of an intermediate holding company (dividend routing)
- securing of gambling licences in Malta, Gibraltar, England and also, on request, in so-called offshore states such as Belize, or a trading licence in Costa Rica
Gambling Licence in Malta
In the middle of 2003 the Maltese government amended its legislation in relation to online betting and games of chance to the effect that, from that point on, it became possible to obtain a licence to open up an online betting office or casino. This new type of legislation makes it very attractive for many firms to set up in Malta as the licence has some important safety features and it is possible, from now on, to promote online betting or casinos in the area of the EU and to offer these services as an operator or an agent (EU freedom of establishment, cf. also: Gambelli judgement).
The licence is issued by the Lotteries und Gaming Authority. This authority is responsible for the control and regulations with regard to the operation of I-Gaming. The licence is issued for 5 years and can be extended thereafter.
Types of licences:
There are 4 different classes of licence. One or even more than one can be applied for.
- Class 1: traditional online games, such as casinos, bingos and lotteries
- Class 2: online games and betting
- Class 3: for operators offering the games and betting as a commission-based service, including fixed odds and gambling stakes ( poker rooms, portals and affiliates and P2P )
- Class 4: for operators of I-Gaming platforms
Taxes in Malta:
Through the “Malta holding company model” a final tax rate of approx. 4.75% is achieved for the business premises. However, this assumes that a foreign public limited company is the majority owner.
Taxes on Gambling in Malta:
- Casino type games: approx. 4,600 euros for the first 6 months following the granting of the licence. From the 7th month and for the remaining period of the licence this comes to 6,900 euros per month.
- if the casino operates from a so-called “host platform” operiert (Class 4 Licence) the following applies: 1,500 euros per month for the casino operator, 0.00 euros in the first 6 months for the host platform, then for the following 6 months 2,300 euros per month and thereafter 4,600 euros per month for the remaining period of the licence
- in the case of betting, betting games: 0.5% of the “gross amounts” of the bets accepted and 0.5% in the case of so-called “pool betting” on “the aggregate of stakes paid”.
- betting exchanges & poker operations: 5% of the “net income”. This is to be equated with the “revenue from rake less bonus”, commisions and payment processing fee; i.e. e-commerce fee.
Required Share Capital for a Gaming Limited Company in Malta:
- Class 1 : €100,000 (one hundred thousand euros)
Class 1 – operators managing their own risk on repetitive games (casino-type games, games of skill and online lotteries) – own platform, at their own risk (casino, skill, online lottery)
- Class 2 -:€100,000
Class 2 – operators managing their own risk on events based on a matchbook (fixed odds betting, pool betting and spread betting) – own platform, at their own risk (betting syndicates)
- Class 3 : €40,000 (forty thousand euros)
Class 3 – operators promoting and abetting gaming from Malta & taking a commission from promoting and/or abetting games (P2P, poker networks, betting exchange and game portals) – promotion or advertising of P2P, poker, betting or games in return for a commission
- Class 4 : €40,000
Class 4 – operators hosting and managing online remote gaming operators, excluding the licensee himself (software vendors developing platforms from which gaming operators can operate). – operation of a platform, on which other games are offered
- Class 1 on 4 : €100,000
Class 1 on class 4 – operators managing their own risk on repetitive games (casino-type games, games of skill and online lotteries) operating on a third party platform duly licensed by the Lotteries and Gaming Authority. – such as Class 1 (own game) but also on a licensed platform of a third party
- Class 3 on 4 : €40,000
Class 3 on 4 – operators promoting and abetting gaming from Malta & taking a commission from promoting and/or abetting games (P2P, poker networks, betting exchange and game portals) operating on a third party platform duly licensed by the Lotteries and Gaming Authority.- Promotion or advertising of P2P, poker, betting or games in return for a commission (on an outside, licensed platform)
Gambling Licence in England
Within the context of the approval procedure there is a judicial hearing in London, at which the director of the limited company is present. The licence is valid for 3 years and can be correspondingly extended. The processing time is 3 -4 months.
In England, a distinction is made between an “organiser’s licence” (he offers his own games of chance on the Internet) and an “agent’s licence”. In addition, there is a difference depending on whether the company wishes to provide gambling within Great Britain or only outside Great Britain (“Remote General Betting License” ).
The taxes on gambling are approx. 15%, with the taxes on the earnings of an English limited company rising progressively from 19-30% (19% up to a profit of 300,000 pounds sterling).
Application fee: one-off fee of 20,580 pounds sterling per licence application. Staff- management licence: 330 pounds sterling per person.
The annual licence fee depends on the gross turnover.
Let us assume, by way of an example, that the client comes under Class I, then the one-off fees as decribed would fall due, and an annual licence fee of 110,820 pounds sterling.
The “gambling tax” can take the form of two “duties”:
- “Betting duty”: the “betting duty” is due on every net amount staked taken in
- “Remote Gaming Duty”: the “Remote Gaming Duty” is due on the net proceeds from games of chance
This is 15% in both cases and is due on the net stakes or proceeds on a quarterly basis.
Gambling Licence in Gibraltar
For many of our clients Gibraltar possibly does not represent the best location as, due to domestic law, an operational business must be set up in a commercial way (a fully-equipped office) and the management must be carried predominantly from Gibraltar. This means, as a rule, that the client – or a representative/full-time employee – must relocate his normal residence to Gibraltar in order to carry out dealings from the country where the business is registered.
The gambling taxes in Gibraltar, in the case of an online casino and sports betting, is 1% up to a turnover of 42.5 million pounds sterling, however with a minimum of 85,000 pounds sterling per year being payable, up to a maximum of 425,000 pounds sterling per year. On top of this comes corporation tax.
An auditor must be appointed in Gibraltar. In addition, the applicant must prove that he has a fittingly positive reputation and is sufficiently creditworthy. The hurdles in the way ofobtaining a licence are correspondingly high. Therefore, relatively few fresh licences are also granted.
All financial dealings must be conducted through a bank in Gibraltar.
Gambling Licence on the Isle of Man
The Isle of Man is not part of the EU. Consequently, the EU freedom of establishment and judgements of the European Court of Justice concerning the freedom of establishment and/or gambling judgements of the European Court of Justice are not applicable. In formal legal terms, the service may only be aimed at participants on the Isle of Man or at clients in countries that are not familiar with gambling regulations or do not recognize the regulations of the Isle of Man (however, none of us here knows of any countries).
- 35,000 pounds sterling per annum
- one-off administration fee of 1000 pounds sterling which is non-refundable
The gambling tax is staggered as follows:
|Total proceeds from gambling up to 20 million pounds sterling:||1.5%|
|Total proceeds from gambling from 20 to 40 million pounds sterling:||0.5%|
|Total proceeds from gambling from 40 million pounds sterling:||0.1%|
|Total proceeds from pool betting:||15%|
Gambling in Costa Rica
Costa Rica adopts a special position. If the gambling service offered is directed at participants outwith Costa Rica, no licence is required, just a trading permit. No share capital is required – except for the share capital of the limited company (public limited company) in Costa Rica. Gambling taxes are likewise not levied in the case of offshore gambling services. Of course, even in the case of Costa Rica, it holds true that offering such a service will, as a rule, be illegal. However, Costa Rica does not have any agreement providing for mutual judicial assistance with other countries, with the result that requests to cease and desist do not pierce the corporate veil.
Gambling Licence in Belize
What is involved in the case of Belize is a typical “offshore country”. Exempt companies (companies that only conduct business outside Belize) are not taxed. The routing fee payable to Belize for gambling is 0.75% of the gross annual takings.
Gambling in Other Countries
In addition to the countries described, our legal office secures gambling licences in: Antigua and Barbuda, Kahnawake and Panama.
What then is the safest legal structure if I would like to offer a gambling service worldwide – or in many countries?
Firstly, a gambling licence within the EU, as the entire EU is “covered” by it (see the statements above, EU freedom of establishment and judgements of the European Court of Justice concerning the feedom of establishment). Since Malta, in addition to England, has the strictest requirements, a licence in Malta would be prudent, as there is, of course, still a problem if the gambling service is also directed at participants outside the EU: the law of the country offering the service comes into play. Due to the strict demands of a licence in Malta, however, other countries would, as a rule “let it through”, or a fresh licence would no longer involve extremely great expense based on a licence from Malta.
In that case, do “non-member country/offshore licences” or a Costa Rica trading licence make any sense at all?
Actually they do not, in formal legal terms since, – as has already been explained several times- the law of the country offering the service also comes into play in gambling law. Besides, the success of a gambling platform on the Internet very often also depends on factors such as:
- legal security for the player
- a secure hosting location
- trust in the service provider
- data security
etc.. Word quickly gets round in player groups that gambling service providers in specific countries may not be very trustworthy since the legal security and the necessary equity capital, among other things, are missing. However, we also look after clients who, for other reasons, prefer a licence in a non-member country or a trading licence from Costa Rica. As a tax and legal office, we do not evaluate such plans, but point out the legal facts. If a client engages us, for example, to secure a trading licence in Costa Rica, then we will also execute such a brief conscientously. It is precisely with regard to Costa Rica or Belize that clients turn to us who are, themselves, resident in a non-member country and/or where the gambling service offered is aimed predominantly at participants in non-regulated countries.
On the subject of real-estate raffles- raffling of tangible assets over the Internet
In princtople, the raffling of real estate/ raffling of tangible assets can be conducted over the Internet through a gambling licence. As an alternative, there is the possibility of achieving this through a limited company (EU company) in Cyprus. In Cyprus, this kind of activity is allowed without a licence. In addition, if EU circumstances are involved, the positive effect of the EU freedom of establishment and judgements of the European Court of Justice and judgements of the European Court of Justice concerning the freedom of establishment come into play.
Legal procedure with regard to raffling real estate, using Cyprus as an example:
The limited company in Cyprus may dispose of its property by way of a lottery.
In order to include a property in the lottery that belongs to someone else the following construct may be described:
- The owner of the property concludes a brokerage agreement with the limited company.
- The owner of the property makes an offer for the sale of the property in front of a solicitor.
- The Cypriot limited company raffles off, as part of the package, agency services, the property and promissory note to the winner
- The winner receives the offer, which he accepts before a solicitor. The solicitor issues the apostille and sends this to the solicitor, before whom the offer was made. The first solicitor applies for the transfer and and asks the winner to pay the purchase price. Thereupon the Cypriot limited company steps “in” and pays the purchase price from the promissory note. Thereafter, the solicitor will apply for an entry to be made in the land register (=transfer of ownership from the owner of the property to the winner).
That is really a lot of information, where do things go from here?
In order to propose a structure, we always require the folowing information:
- At which participants- and in which countries- is it intended to offer the gambling service?
- Does it involve a “reseller operation” (if “yes”: In which country is the service provider licensed?), or “providing a service of your own”?
- If providing a service of your own: Who programs the gambling platform?
- Where are you subject –as a natural person – to unrestricted tax liability ?
- Where are the subsequent owners/shareholders of the gambling company subject to restricted or unrestricted tax liability ?