Category Archive: Tax
Last Thursday (Sejm) and Friday (Senat), an amendment to the Polish Gambling Act was adopted. Once signed by the Polish president and published, it will come into force on 1 April 2017. Its official aim is to increase the protection of players against risks related to excessive gambling and to decrease the unlicensed market. However, it extends the number of games permitted in Poland and includes a couple of revolutionary changes:
The Government has confirmed it will go ahead and bring the remote gaming duty treatment of freeplays in line with the less generous treatment of free bets under general betting duty. This will take effect for accounting periods commencing on or after 1 August 2017 as previously announced. We expect to see the responses to HMRC’s consultation on freeplays and the draft legislation on 5th December 2016.
Use and enjoyment VAT charge for advertising services
There is still no news on whether the UK is going ahead to impose VAT, under an extension to the effective use and enjoyment rule, on B2B advertising and marketing (including affiliate marketing) services which are supplied to non-EU established businesses. The UK had announced it was intending to do this, once it had imposed VAT on insurance repair services carried out in the UK, which has been done. With Brexit preparations ongoing, the extension of the use and enjoyment rule to advertising services may now be on the back-burner.
Avoidance Disclosure Regime to include gambling duties
In a bid to strengthen the tax avoidance disclosure regimes for indirect taxes, the government intends to extend the scope of the VAT Avoidance Disclosure Regime to cover all indirect taxes, including gambling duties. Provisions will also be made to move the primary obligation to disclose avoidance schemes from users to promoters. These changes will have effect from 1 September 2017.
For further information please contact Richard Woolich, UK Head of Tax.
By Paweł Satkiewicz, Senior Associate, DLA Piper, Warsaw
On 28 June 2016, the Polish Supreme Administrative Court (“NSA”) issued an important judgment (I FSK 180/15) regarding an exemption from the tax on goods and services (“VAT”) pursuant to Article 43 paragraph 1 point 15 of the Polish VAT Act. This exemption applies to activities related to games of chance, betting, and gaming machine games, which are subject to gaming tax on the terms specified in a separate act.
According to the NSA, there are no grounds for excluding from this VAT exemption gaming machine games organised outside casinos without a relevant license or permit. In this regard, the NSA referred to the reasoning of the C-283/95 Karlheinz Fischer judgment of the Court of Justice of the European Union and based its argumentation on the VAT neutrality principle. According to the NSA, both games of chance in casinos and games of chance illegally organized outside casinos should be treated in the same way (i.e. should be exempt from VAT). It must be underlined that one of judges expressed a dissenting opinion to the judgment.
On Monday 23 May, the Ministry of Finance (the Polish gambling regulator (“Regulator“)), published a list of points to be covered by the forthcoming amendment to the Polish Gambling Act. According to the list, the amendment will cover the following points:
- IP and payment blocking will target unlicenced operators. This should reduce the “grey area” in gambling, increase the market share of licenced operators, and raise the level of protection for players, because – according to the Regulator – only licenced operators guarantee the offering of games in a safe and responsible way.
- The operation of slot machine games outside casinos will be covered by a state monopoly and operated by a designated company. They will only be operated in designated places, under permanent supervision, and will not be available for people under the age of 18.
- Operators offering games on slot machines and online gambling will be required to introduce responsible gaming regulations which should increase the protection of players from the negative effects of gambling.
- Sanctions for violating the Polish Gambling Act will be more severe (however, it is not specified what this means). This will disrupt unlicenced operators and thus increase the market share of licenced operators.
- The regulation of poker games will be liberalized. It will be permitted to organize poker games outside casinos and the process of organizing them will be simplified. It will be possible to legally participate in online poker games.
- The requirement for people directly supervising and operating gambling games to pass professional exams will be liquidated. The exams will be replaced by training obligations. According to the Regulator, this should reduce red tape and the costs for entities operating in the gambling industry.
According to the Ministry of Finance, these proposals represent a compromise between providing the highest possible level of protection for players against the adverse effects of gambling (including limiting the “grey area”) and guaranteeing the transparent and efficient functioning of the legal gambling market in Poland.
According to the Regulator’s announcement, the draft amendment has been transferred to departmental consultation. If enacted following EC notification, the amendment will come into force on 1 January 2017.
The key issue that is missing from the above list – and the most important issue for any onshore and offshore operator – is that of taxation. The announcement does not say anything about whether Polish gaming tax will be based on GGR under the amendment.
The proposed timing for the introduction of the amendment is quite challenging as it does not seem to take into consideration the fact that the EC notification process may take longer than three months stand-still. Another question mark is whether there will be any transitional period for operators to adjust their activities and apply for licences under the new regime.
The link to the full text of the Regulator’s announcement: http://www.mf.gov.pl/ministerstwo-finansow/wiadomosci/aktualnosci/-/asset_publisher/M1vU/content/mf-przygotowalo-projekt-nowelizacji-ustawy-hazardowej?redirect=http%3A%2F%2Fwww.mf.gov.pl%2Fministerstwo-finansow%2Fwiadomosci%2Faktualnosci%3Fp_p_id%3D101_INSTANCE_M1vU%26p_p_lifecycle%3D0%26p_p_state%3Dnormal%26p_p_mode%3Dview%26p_p_col_id%3Dcolumn-2%26p_p_col_count%3D1#p_p_id_101_INSTANCE_M1vU_
According to the statement of the Polish Minister of Finance, Paweł Szałamacha (the Gambling Regulator), proposals for the new Polish Gambling Act were to be presented by the end of April 2016. To date this has not been done. However, on Sunday 15 May, a press conference was organized by Minister Jarosław Gowin (Deputy Prime Minister and Minister of Science and Higher Education, representing the right wing party Polska Razem) and Zbigniew Boniek (President of Polish Football Association).
During the press conference, Minister Gowin outlined his proposals for the new law regulating betting and card games like poker. Under the new law, betting and card games like poker should be ‘excluded’ from the Gambling Law.
With respect to betting, the gaming tax should be based on 20% GGR instead of the current 12% turnover tax. According to the authors of the proposal, this should generate income of PLN 200 million (i.e. EUR 50 million) for the state budget. Further, since there should be some liberalization with respect to advertising and sponsoring, sports team in Poland should earn an additional PLN 100 million (i.e. EUR 25 million). 10% of the revenue from gaming tax should be allocated to socially important initiatives. Namely, 7% should be given to the Polish Olympic Committee and used to support youth sport, while the remaining 3% should be used to combat gambling addiction.
According to the authors of the proposal, it should result in the situation where 70% of the Polish betting market is regulated, because the new law should permit the blocking of both IP and payments of operators that do not have a valid Polish licence.
With respect to poker, which is currently permitted only in licenced land-based casinos, the new law should permit online poker and the organizing of tournaments by licenced operators. It should also de-criminalise poker games played in private houses as a social card game (which is currently prohibited and subject to fines and even imprisonment).
The proposals for the new law were not prepared by the main party in the Polish government – PIS (Law and Justice); however, Minister Gowin hopes that they will gain its support and be adopted by the Polish parliament.
Following a press conference on 2 April during which the Polish Minister of Finance announced that a draft of the new Polish Gambling Act should be ready by the end of the month, the media has been discussing how it may regulate gambling in Poland. There is a suggestion that the new regulations will be based on the Danish model and that it will include a gaming tax of (depending on the source) between 10% and 20% of GGR.
It is suspected that the new regulations will extend the list of permitted online gambling activities from online betting to include online poker (including live poker) and online casinos. It is expected that there will be a moderate fee for obtaining a gambling licence and that advertising and sponsoring rules will be liberalized. As well as providing an additional source for the Polish government to finance its family support program “500+” (PLN 500 monthly for each second and next child in a given family), the new law should also encourage gambling operators to spend more on sponsoring sport in Poland.
On the other hand, it is also speculated that the new law may introduce more effective measures to prevent Polish residents from using websites of unlicenced operators, such as IP blocking or payment blocking. Totalizator Sportowy (a state-owned company) would like to have a back-tax introduced for offshore operators as is the case in Romania.
Richard Woolich – Tax Partner, Gambling Group
The EU VAT Committee has published the working paper in connection with their March discussions on the complex EU VAT issues concerning on-line gambling. It has no force of law. Two points worth picking up in particular:
- There is a fairly thorough analysis of taxable amount, with the conclusion, based on case law (and indeed in line with the recent Irish guidance) that winnings paid back can be excluded from the taxable amount where there is a legal or statutory obligation to pay out a certain percentage of takings as winnings, and that amount is known by all parties before the service is supplied. The paper also deals with bonuses (generally expecting them also to be excluded from taxable amounts) and how to calculate the right amount of VAT to pay in each Member State.
- There is a statement that Member States can apply different conditions and limitations to the application of the EU VAT betting exemption, subject to the principle of the fiscal neutrality. There is a call for individual Member States to provide clarity on the treatment in their jurisdiction in the hope that more certainty will avoid litigation.
Any queries, please contact Richard.firstname.lastname@example.org
As if the tax whammy on bookmakers wasn’t enough, the voluntary code of conduct compelling bookmakers to take tougher precautions to ensure limits are placed on the amount of money and time spent on machines is set to become a series of binding licence conditions. Likewise the primary purpose revisions may also impact shops, even if the retail estates are scaled back, given they will limit the machines that are made available for use.
The Chancellor of the Exchequer gave his Budget speech today.
The Budget document itself is available here.
Much has been written and discussed about the effectiveness of the regulations that govern iGaming country markets, with concerns pointing to the costs and barriers facing operators serving into multiple jurisdictions in the absence of common ‘European-wide’ legislation. However, by examining the components of today’s regulated markets and drawing out the best qualities from each, are we able to piece together a blueprint for the perfect iGaming regime? Stephen Ketteley and Ash Averill of DLA Piper assess the current European frameworks in operation in the pursuit of finding the perfect regime.
Read The Blueprint for iGaming Regulation – The Perfect Regime which appear in the November/December edition of iGaming Business.
By: Miguel Baz and Rodrigo Gastalver from DLA Piper Spain
The European Commission considers that the current taxation system was conceived in a pre-computing age so that it must be adapted in order for the digital sector to “play fair and pay fair“.
For this purpose, it has created a High Level Export Group on Taxation for the Digital Economy to analyze the best ways of taxing the digital economy in the EU, ways which will be in turn put in practice.
We anticipate that within the framework of the analysis to be produced current tax issues such as the virtual permanent establishments or the royalties upon software licenses will come up.
At the same time, the EU will continue with its cooperation with the OECD to reach to a coherent and complementary approach to digital taxation at the EU and international level.
The press note issued by the European Commission on this development is available here.
In the 2012 Budget, the UK government announced its intention to tax remote gambling on a point of consumption basis. A consultation ran from 5 April 2012 until 28 June 2012 whereby operators, suppliers and other interested parties were invited to provide comments and responses. Today (16 August 2013), the responses to the consultation were published.
On June 20 2013 DLA Piper’s Spanish tax team will be holding an event where an official from the tax authority will be discussing the tax issues connected with the operation of online gambling activities, with a special focus on the sensitive issue of the existence of a permanent establishment. Please note that the seminar will be held in Spanish.
For more information or to confirm your attendance, please click here to access the invitation.
The Italian gambling authority, AAMS, published the data on the Italian online gaming market for the first quarter of 2013 which show a minor reduction of spending of 0.2% compared to the same period of 2012, but what looks very interesting is that almost 50% of the spending in the market is generated by casino games and cash poker games. And casino games and cash poker games are the sole games currently subject to a gross profit tax regime.
At the end of 2012, the UK Government released draft legislation as part of the Finance Bill 2013 in connection with the proposed tax relief for video games development. On the assumption the draft legislation will be adopted largely in its current form, DLA Piper’s Media team have set out some of the key issues for developers and video game production companies to be aware of.
Please click here to read the breifing note.