Tax Cuts for Gambling Business in Ukraine

by Anna Gayduk
Monday, November 8, 2021
Tax Cuts for Gambling Business in Ukraine

The parliament of Ukraine will consider innovations in tax legislation for the gambling market

Dmytro Kondratyev, a lawyer at Axon Partners and Poster commented on the particulars.

The parliament of Ukraine plans to consider the key bill, which stipulates a reduction in tax rates for organizers of gambling and lotteries. This is the second stage of establishing the rules of the game for the operation of the gambling industry after the legalization of gambling in Ukraine.

The main innovations provided by the bill:

  • The tax rate on income from winnings is set at 10%;
  • The organizer of gambling is recognized as the tax agent of the players, and withholds 18% tax on personal income and 1.5% military tax per person who won the sum of money, for further transfer to the budget;
  • The winning amount (value) of which does not exceed 10 sizes (previously there were 8 in the draft law) of the minimum wages established on January 1 of the calendar year, is not subject to taxation! The bill on the state budget for 2022 provides for a minimum wage for January 1, 2022, in the sum of $250, which means that the winnings that excess $2.500 will be taxed.
  • If the sum (value) of an individual win (prize) in lotteries/gambling exceeds 10 times the minimum wage, the tax agent, who is also the organizer of gambling, taxes the amount of such excess.
  • NBU will be instructed to increase the limit for cash settlements with individuals for land-based casinos;
  • The right to classify unclaimed winnings as bad debt is spelled out, provided that more than 365 days have passed since the winnings.

Speaking about the most significant changes the bill makes to the industry: it cancels triple royalty payments.

The current law in the transitional provisions establishes a triple size of license fees until the introduction of a unified system of online monitoring of gambling establishments in Ukraine. The new tax law removes the triple payment of royalties for gambling.

For example, prior to the adoption of this bill, online casinos pay licensing fees in the sum of $897 thousand per year, after the adoption of the bill they will pay $299 thousand. Bookmakers pay about $4.1 million a year, and with the changes made they will pay $1.3 million.

The conflict of laws rule on the appointment of commission for the regulation of gambling and lotteries members is excluded, the competitive selection is organized exclusively by the commission for the higher corps of the civil service, without any interference of the parliament’s committee.

The technical means of the online system for organizing gambling, ensuring its connection to the state online monitoring system, must be located exclusively on the territory of Ukraine.

Information in the online system must be processed on the territory of Ukraine, i.e all information about players, winnings, other accounting and tax information should be processed only on servers located on the territory of Ukraine.

At the same time, the servers of gambling sites (the general content part of gambling platforms) can be located both on the territory of Ukraine and on the territory of the EU.

Gambling servers cannot be located on the territory of a state, recognized in accordance with the law as an occupying state and/or an aggressor state in relation to Ukraine.

If the parliament adopts the bill in November, it will come into force on January 1, 2022.

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