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Ukraine to Introduce New Tax Framework for Gaming

29/ 07/ 2021
  On 15 July 2021, the Ukrainian Parliament adopted at its first reading the draft law introducing the new tax framework for the gaming industry (No. 2713-д). This is one of the key steps towards the full-fledged relaunch of Ukraines gaming market following its ban in 2009. In order for the draft law to enter into force, it should be adopted by the Parliament in the second reading and signed by the President, and so the draft law may be further amended. This note outlines principal provisions of the current draft law. Taxation of gaming companies Tax regime. The anticipated tax regime for gaming operators will combine both corporate income tax (CIT) and gross gaming revenue (GGR) tax. CIT. Corporate income is taxed at the 18% rate. The tax base will include income received from gaming and any other, non-gaming, activities (but the tax base will be reduced by the GGR tax, as discussed below). GGR. The GGR rate will be 10%, and this rate will apply to any type of gaming activity. The tax base for GGR will be (a) revenue received from gaming activities, plus (b) unclaimed winnings, less (c) payouts and returned bets. The 10% GGR tax will be deductible from the taxable income and, accordingly, will reduce the tax base for the purposes of calculating CIT. Taxation of B2B service providers. B2B companies will not be subject to GGR; they will only be required to pay CIT. For example, if a gaming operator receives income of EUR 100 from gaming activities and EUR 10 from any other, non-gaming, activities, while the operator incurred expenses of EUR 40 (excluding payouts) and made payouts of EUR 35 (and assuming there are no unclaimed winnings and returned bets), the income would be taxed at: EUR 6.50 calculated at the 10% GGR tax rate on the gaming revenue of EUR 100 less the payouts of EUR 35; and EUR 5.13 calculated as the 18% corporate income tax rate on the income of EUR 100 from gaming and of EUR 10 from other, non-gaming, activities less the expenses (including the payouts and the GGR tax) of EUR 81.50. Taxation of players Personal taxation. Wins of less than eight times the minimum wage (approximately EUR 1,500) as of 1 January of the relevant year will not be subject to personal income tax (at the 18% rate) and military tax (at the 1.5% rate). Only the excess amount will be subject to these taxes. Players expenses incurred within the 24-hour period preceding their win (for example, a casino entry fee) will reduce the tax base for personal income tax (if payable). Payment of personal taxes. Gaming operators will act as the players tax agents – that is, operators will be responsible for reporting and payment of personal taxes derived from their players gaming activity. When reporting, the personal data of players should be anonymised. Cancellation of tripled licence payment Currently, the Gambling Law provides that the amount of licence payments for betting, online casinos and slot machine halls will be tripled until the State System of Online Monitoring is launched (anticipated by August 2022). The draft law suggests that the requirement to triple licence payments will be abolished. Operators that have already made these tripled payments will be able to offset those payments against future licence payments. If you would like to know more about the subject covered in this publication, please contact Oleksandr Markov, Head of Tax, and Vlad Zakon, Gaming Practice Coordinator.

On 15 July 2021, the Ukrainian Parliament adopted at its first reading the draft law introducing the new tax framework for the gaming industry (No. 2713-д). This is one of the key steps towards the full-fledged relaunch of Ukraine’s gaming market following its ban in 2009.

In order for the draft law to enter into force, it should be adopted by the Parliament in the second reading and signed by the President, and so the draft law may be further amended. This note outlines principal provisions of the current draft law.

Taxation of gaming companies

  • Tax regime. The anticipated tax regime for gaming operators will combine both corporate income tax (CIT) and gross gaming revenue (GGR) tax.
  • CIT. Corporate income is taxed at the 18% rate. The tax base will include income received from gaming and any other, non-gaming, activities (but the tax base will be reduced by the GGR tax, as discussed below).
  • GGR. The GGR rate will be 10%, and this rate will apply to any type of gaming activity. The tax base for GGR will be (a) revenue received from gaming activities, plus (b) unclaimed winnings, less (c) payouts and returned bets. The 10% GGR tax will be deductible from the taxable income and, accordingly, will reduce the tax base for the purposes of calculating CIT.
  • Taxation of B2B service providers. B2B companies will not be subject to GGR; they will only be required to pay CIT.

For example, if a gaming operator receives income of EUR 100 from gaming activities and EUR 10 from any other, non-gaming, activities, while the operator incurred expenses of EUR 40 (excluding payouts) and made payouts of EUR 35 (and assuming there are no unclaimed winnings and returned bets), the income would be taxed at:

  • EUR 6.50 calculated at the 10% GGR tax rate on the gaming revenue of EUR 100 less the payouts of EUR 35; and
  • EUR 5.13 calculated as the 18% corporate income tax rate on the income of EUR 100 from gaming and of EUR 10 from other, non-gaming, activities less the expenses (including the payouts and the GGR tax) of EUR 81.50.

Taxation of players

  • Personal taxation. Wins of less than eight times the minimum wage (approximately EUR 1,500) as of 1 January of the relevant year will not be subject to personal income tax (at the 18% rate) and military tax (at the 1.5% rate). Only the excess amount will be subject to these taxes. Player’s expenses incurred within the 24-hour period preceding their win (for example, a casino entry fee) will reduce the tax base for personal income tax (if payable).
  • Payment of personal taxes. Gaming operators will act as the players’ tax agents – that is, operators will be responsible for reporting and payment of personal taxes derived from their players’ gaming activity. When reporting, the personal data of players should be anonymised.

Cancellation of tripled licence payment

Currently, the Gambling Law provides that the amount of licence payments for betting, online casinos and slot machine halls will be tripled until the State System of Online Monitoring is launched (anticipated by August 2022). The draft law suggests that the requirement to triple licence payments will be abolished. Operators that have already made these tripled payments will be able to offset those payments against future licence payments.

If you would like to know more about the subject covered in this publication, please contact Oleksandr Markov, Head of Tax, and Vlad Zakon, Gaming Practice Coordinator.

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