Gambling License: Gambling License and Tax-Law Aspects

What is also crucial within the context of a gambling company is the prevention of the approval of an illegal intermediate company. Due to the EU freedom of establishment and judgements of the European Court of Justice on the freedom of establishment, this problem can be solved relatively easily within the EU. Unlike when setting up companies in so-called offshore states (countries with low rates of taxation or with a zero tax rate and without a double taxation agreement with the country in which the registered office of the client is located, outside the EU): the approval of an illegal intermediate company can, actually, only be prevented by putting a business operation in place in the country in which the company has its registered office (that is, Belize, the Isle of Man and Costa Rica, for example) that has been set up in a commercial way and the senior management of the business can be proved to be operating from the country in which the company has its registered office, that is, there is a full-time director and not simply a nominee director. Of course, there are appropriate structural possibilities and/or approaches to solving problems.

Fiscal Structural Possibilities

First of all, a so-called gambling or betting tax is due in almost all countries. In addition, the profits of the gambling company are taxed. In Malta, there is the possibility of reducing the final tax rate imposed at company level through the Malta holding company model to 4.75%.  

Taxation of Dividends  

The profits after tax (dividends) are due to the shareholder/owner of the company. Most countries are familiar, in this connection, with a tax at source in the case of dividends flowing out of the country. Such a tax at source can, in principle, only be limited or cancelled through two measures:  

-The country is not familiar with tax at source in the case of dividends flowing abroad (Example: Cyprus)

-An existing double taxation agreement (DTA) limits the tax at source

-The aplication of the EU parent company-subsidiary company directive: collection of the dividends free of tax at source in the case of affiliated companies within the EU

-The interposition of an EU holding company. Cyprus, in particular, is a possibility in this case: Application of the EU parent company-subsidiary company directive (provided that the subsidiary company/gambling company are located within the EU), Cyprus does not tax  proceeds that are purely from holdings(holding privilege), and there is no tax at source in the case of the distribution of the dividends to non-Cypriots.  

Apart from the tax at source, the dividends are taxed at the recipient of the dividends end in accordance with domestic law. In Germany, for example, at a withholding tax rate of 25%, and in many other countries according to the half-income system. If a double taxation agreement exists between the country of the recipient of the dividends and the country of the base company, and the possibility of using the credit method exists, tax paid at source can be deducted from the tax on dividends.  

If, in the case of the dividend recipient, it involves a public limited company, then, in most cases, the dividends are collected tax-free. In addition, in the case of EU companies, the EU parent company-subsidiary company directive comes into play.