Member Article

Brexit - What Happens to Offshore iGaming Operators?

iGaming - sector is a strong one in the United Kingdom. No wonder, since some of the most powerful such businesses have their roots here - think William Hill, Ladbrokes Coral, or the Stokes on Trent based online-only operator Bet365. The UK gambling market is massive and attractive for many. Some Nordic operators, like Unibet and Betsson, have even chosen the UK as their debut market, expanding here sometimes even before their local one. With such a massive player base, smaller - offshore - operators like WinTingo online casino will surely continue to dream of breaking into this massive market. Their access was already restricted by the UK’s strict regulations even before the country decided to leave the EU, and they might have to overcome even more serious obstacles once it leaves the unified economic area.

Like WinTingo, the majority of offshore operators hoping to make a living in the EU have obtained a license issued by the MGA (Malta Gaming Authority). For years, this was enough for them to operate in the UK - the UKGC accepted it as a license equivalent to its own. The introduction of their Point of Consumption tax, though, made it a tough job for the WinTingo and its likes to break into the UK, even prompting some major operators to leave the UK and establish their bases of operations (and move their servers) in Gibraltar. Brexit might prove to be a further difficulty even for them. If Gibraltar decides to stay in the EU in one form or another, all operators based there might become “offshore” overnight, much like the WinTingo is today. What will this mean for the thriving online gambling industry?

The gambling tax regime of the UK will most likely be unaffected by the country’s exit from the European Union. As all other internal taxes, the 15% PoC tax is a matter that, although it needed to be in accordance with the European legal framework at the time of the introduction, concerns the UK government alone. It was not influenced significantly by the European tax laws, so it is likely to stay the same after the UK leaves the EU.

The EU might, in turn, introduce a new tax regimen for servers used for offering cross-border digital services within the community. This means that gaming operators with servers in the EU might become “established” in the EU when it comes to taxes. Such a regime is not unprecedented - India, for example, considers web servers on its territory to be business establishments (even if the company has its headquarters elsewhere), and taxes them accordingly.

The inter-group relationships for companies in such a situation - incorporated in the UK, but with servers hosted in the EU - may become more complicated in the new, post-Brexit paradigm. Such companies might find themselves facing a different tax regime for intra-group payments made between operations in and outside the EU, which could negatively affect their cash flow. More details on this here

This was posted in Bdaily's Members' News section by Gagan Chhatwal .