Hungary: Proposed gambling law modifications

The Hungarian legislator intends to qualify remote gambling as a non-liberalized activity pursuant to a draft-amendment of the Gambling Act filed with the European Commission. Although remote gambling (online horserace betting and online card games) has qualified since 2011 as a liberalized activity which may be carried out with possession of a licence, no licences have been issued as the executive order for remote gambling has not been published yet.

The Hungarian government filed at the beginning of this year a draft amendment of its gambling legislation pursuant to which remote gambling shall qualify as a non-liberalized activity but remote gambling shall include not only online horserace betting and online card games but also sports betting and online casino games.

Non-liberalized gambling activities may only be performed in Hungary either by (i) the state gambling company (or by company owned in 100% by it or by a company where the state has majority ownership) or by (ii) a concession company through concluding a concession agreement with the Hungarian State.

According to the draft legislation, the conclusion of a concession agreement and the establishment of a domestic concession company is necessary if an operator intends to provide remote gambling services in Hungary. The registered capital of the concession company providing online gambling services shall be at least HUF 200 million (approximately € 678,000).

The Hungarian government will issue an unlimited number of licenses valid for a period of five years, with the minimum licence fee applicable for the year 2013 set at HUF100m (approximately €341,000) per game type. Licensed operators will be subject to a 20 per cent tax on gross gaming revenues (GGR) payable every two weeks, as well as quarterly supervisory fees calculated at 2.5 per cent of GGR but at least HUF100,000 (€340) and no more than HUF 50m (€170,000). There is no requirement for private operators from within the European Economic Area (EEA) to house their data storage servers within Hungary, but any companies who choose to do so voluntary by setting up a secondary data storage server in Hungary will receive a 25 per cent discount on the supervisory fee. In any case, remote gambling servers must at all times be accessible to the Gambling Authority.

The proposed amendment also intends to modify the personal income tax act by declaring that incomes from lawful organized remote gambling are not subject to personal income tax, which would be beneficial for the punters.

Besides the above, the amendment also extends the applicable Hungarian anti-money laundering and anti-terrorism financing provisions to remote gambling.

The main concern regarding the proposed gambling law amendment, besides the high licensing fee, is the requirement of establishing a domestic concession company. The currently effective gambling laws require from the operator of remote gambling only to have its registered seat within the territory of the EEA and the establishment of a domestic company who will apply for the license is no requirement.

Hungarian gambling lawyers, market participants and also some representatives of the state gambling authority are of the opinion that the wording of the proposal will most likely change before the final vote, as the requirement to have a domestic concession company is not attractive for most online gambling operators who would think about applying for a Hungarian remote gambling concession.