This summer marks the second year since the adoption of the Law of Ukraine “On State Regulation of Organizing and Conducting Gambling” No. 768-IX, which, after more than an eleven-year break, legalized gambling in Ukraine. However, the issue of the fiscal load on gambling remains unresolved.
Almost a year ago, on 15 July 2021, the Verkhovna Rada adopted on first reading the draft law “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Taxation of Income from Organizing and Conducting Gambling and Lotteries” No. 2713-d offering the following tax regulations for legal gambling operators in Ukraine:
- 18% corporate income tax, like most other businesses in Ukraine;
- the same 10% gross gaming revenue (GGR) for all types of gambling;
- 20% VAT on all related contracts;
- 19.5% tax for winnings exceeding the guaranteed tax-free amount of 8 minimum wages (18% personal income tax and 1.5% military levy).
This draft law also corrects an error in the framework law, which allows repeated taxation of the income of some gambling operators, particularly slot machine operators.
The draft law was submitted for the second reading at the winter session, but a full-scale war broke out, and it was forgotten. However, such forgetfulness resulted in Ukraine’s loss of investments which could be attracted by the domestic gambling market. If the issue of the fiscal burden is still relevant, international companies will prefer other countries, particularly our neighbours, the Baltic countries.
For instance, in May this year, the world-famous gambling brand William Hill was launched in Latvia. For that, the company gained the support of the Gaming Innovation Group (GiG) with its iGaming platform. It has allowed us to offer gamblers the most advanced, exciting, and user-friendly sports betting and online casino solutions.
Favourable tax conditions for the gambling business in the growing Latvian gambling market became possible due to the mutual efforts of William Hill and GiG.
For example, a general annual license for a gambling operator in Latvia is EUR 427,000, while in Ukraine, it is from EUR 1.3 million to EUR 2.5 million (we have a five-year license costing from 30,000 to 60,000 minimum wages, depending on the location of the business activity, in the regions or Kyiv).
In the case of betting activities, the cost of a 5-year license is UAH 560 million (or UAH 112 million, which equals EUR 3.5 million for one year). The license for an online casino is EUR 200,000, while our license (before the state online monitoring system is introduced) costs EUR 1.3 million. If gambling is carried out via telecommunications, the tax on gambling in Latvia, regardless of its type, is 10% of the income from gambling.
In Ukraine, a similar provision is introduced only in draft law No. 2713-d. In Latvia, if the amount of winnings for the taxable year does not exceed EUR 3,000, lottery and gambling winnings are not included in the annual taxable income and are not taxed.
In Ukraine, there is a proposition not to tax winnings less than the equivalent of EUR 1,650 (8 minimum wages at the NBU’s current fixed rate).
The comparison clearly shows that Latvia has already introduced norms into the gambling tax system, which in Ukraine are usually proposed as legislative amendments. As for the cost of the license, the difference may be explained by a much bigger domestic market compared to the Latvian one, which is, in fact, true.
Thus, the sooner the deputies remember to adopt tax changes to tax gambling, the sooner large international gambling brands enter the domestic market.