Taxes on gambling is one of the main issues for any online casino operator. It largely determines both jurisdiction and the regions of operation. Gambling business is usually taxed according to the legislation of a particular country. The gambling taxes are often much higher than in other commercial areas.
Where do the gambling taxes go?
Many governments have long understood that online gambling cannot be eradicated through direct bans and blocks. On the contrary, gambling legalization brings large budget replenishment to the country. Therefore, most of the developed countries have implemented the tax regulation of online gambling in recent years.
What is more, many states oblige the casino players to pay income tax on gambling winnings. Budget revenues from gambling are usually spent on the social sphere, the development of tourism or national projects. Let's consider the current tax rates in several countries for both B2B and B2C sectors.
Russia and CIS countries
Online gambling is banned in many CIS countries, particularly in Russia and Ukraine, aside from some forms of gambling, such as betting or lottery.
Recently, online gambling was legalized in the Republic of Belarus. Now, in accordance with the new law, Belarusian operators can legally run the gambling business on the Internet. The tax is levied on legal entities operating within the Republic of Belarus, as well as on simple partnerships, foreign and international organizations.
According to Art. 309 Part 1 of the Tax Code of the Republic of Belarus:
"Gambling tax rates are set in the following amounts per unit of taxation object: BYR 7 140.95 on the gaming table; BYR 241.53 on the slot machine; BYR 2 250 on the betting terminal; BYR 1 500 on the cash register of the bookmaker office. If payers use a gaming table that can be connected to a special computer cash system that provides control over turnover in the gambling business, the tax on gambling specified above shall be reduced by 50%. "
Online betting and several lotteries are legalized in Russia. The tax rate for business is differentiated. For example, each processing centre of the bookmaker or the tote that accepts online bets is liable to tax in the amount of RUB 2.5 to 3 million.
Since recently, the Russian bookmakers began to deduct tax from the players. Now bettors don't need to learn how to pay taxes on the winnings, prepare tax returns and make payments.
Only winnings of RUB 15 000 or more are subject to tax. Rate: 13% for Russian residents and 30% for non-residents.
In Ukraine, only lottery business, monopolized by the state, legally operates online. Local players also pay identical tax rate on gambling winnings. It is 18% + 1,5%. Total: 19.5%. Moreover, the added rate is charged to support the army.
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UK gambling operators pay a fixed tax rate of 15% of gross income. The players are fully exempt from win tax levies.
Each American state independently enacts laws concerning gambling business. Taxation of casinos is more applicable to land-based gambling establishments. Online casinos are prohibited in most US territory. However, online sports betting is legalized in the following states: West Virginia, Connecticut, New Jersey, New York, Mississippi and Pennsylvania.
Taxes for operators are also defined by the legislation of each state separately. One of the highest applicable rates is in Pennsylvania – 55%. Residents of the US pay 30% tax on the winnings.
The issue of online gambling regulation in South Africa remains unsolved. It is still considered illegal regarding both operation and participation in gambling. Excluding sports bets and horse racing.
The standard corporate income tax in Africa is about 29%. Tax on gambling winnings to be paid by the players is 15%.
In August 2017, the Australian Senate approved the nationwide ban on online gambling. It influenced all the online casinos, poker rooms and bookmakers except local licensed operators. They will have to pay 15% gross income tax starting from 2019. And there is no tax on winning.
Online casino is legalized in these countries. The operators have to obtain a gaming license from the local regulator to work in the region.
Mexican licensed operators must pay 30% tax. Moreover, the operators have to additionally pay 12% tax from the winning, while the players have to pay 6%.
The income tax rate for gambling in Argentina is 41.5%. If the win exceeds 1200 Argentine pesos (approximately €48), the player must pay 31% tax.
Penalties for tax evasion
Usually, sanctions for players come as fines. For example, the late payment of the tax implies the deduction of 5-20% of the overdue amount up to criminal prosecution in Russia.
Once illegal activities are detected, the tax authorities first impose a 5% fine of the unpaid amount for each month of delay. And if the amount of unpaid taxes exceeds RUB 900 000, you can end up behind the bars.
In the USA, tax evasion is generally considered one of the most serious crimes. The established system of penalties provides for the recovery from the violator $100 thousand or the imprisonment up to five years.
The operator can suffer from the tax evasion as well. Large fines that can put a company on the verge of bankruptcy, the suspension of activities, revocation of gaming license and criminal prosecution of the CEO and chief accountant.