In a strategic move to attract foreign investment and strengthen its position in the global gambling industry, the Parliament of Georgia (the Parliament) recently passed amendments to the tax laws governing online gambling (the Amendments). Adopted on 27 June 2024, the Amendments introduce more favorable tax conditions for entities operating online gambling websites in Georgia for foreign players, and are set to come into effect on 1 December 2024. By reducing the tax burden and fostering a more competitive environment, the Parliament aims to draw international operators and elevate Georgia’s profile in the global gaming market.
In light of the Amendments, this article provides an overview of Georgian regulatory framework for online gambling operators targeting foreign players and the specific tax regulations that will apply to these activities.
Permit for Online Gambling Operators
Online gambling in Georgia is governed by the Law of Georgia on Organizing Lotteries, Games of Chance, and Other Prize Games (the Gambling Law). The Gambling Law sets out the regulatory framework for the industry, covering areas such as the issuance of permits, information disclosure, and the protection of players’ rights. Under the Gambling Law, all operators of online gambling websites shall hold a permit issued by the Revenue Service of Georgia (the Revenue Service). The Revenue Service, as the regulatory authority, oversees all matters related to gambling in Georgia.
To obtain a permit for online gambling, the permit seeker shall first obtain the authorization certificate from Random Systems Georgia to ensure compliance with relevant international standards and Georgian legislation. Random Systems Georgia is a company appointed by the Revenue Service for implementing and operating the electronic gaming business control system. For this purpose, the Random Systems Georgia monitors gaming products and services of Online Gambling Operators in Georgia. After the authorization certificate is issued, the permit seeker shall apply to the Revenue Service.
Once the permit for operation of online gambling is obtained, the Amendments allow permit holders to utilize two internet domains. However, in such cases where two internet domains and websites are utilized, one domain and website must be exclusively for Georgian players and the other for foreign players.
Fees to be Paid by the Permit Holder
Permits for operation of online slot salon and online casino may be issued either to holders of permits for land-based gambling or to new applicants who do not possess such permits. The annual permit fee solely for slot website is GEL 1,000,000. For an online casino, the annual permit fee is GEL 5,000,000.
However, to operate online sportsbook targeting solely foreign players, in addition to permit for online operations, the operator shall also secure a permit for a land-based sportsbook and maintain at least one land-based location. Consequently, the annual permit fees are as follows: GEL 30,000 to GEL 300,000 for the land-based sportsbook, depending on the location on the territory of Georgia, and GEL 100,000 for the online sportsbook. In addition to the annual permit fees, the operators of land-based gambling are subject to additional quarterly fees. Therefore, operator of online sportsbook will be required to pay quarterly fee from GEL 250,000 to GEL 300,000 depending on the location of land-based facility within Georgia.
Taxes to be Paid by the Permit Holder
Tax Regulations for Slot Salons – The Tax Code of Georgia governs taxation of gambling operators. For land-based slot salons, the taxable base is the Gross Gaming Revenue (GGR), which represents the difference between the total bets received from players and the winnings paid out to them. Generally, the slot salon operator is subject to a 15% corporate income tax rate. However, according to the Amendments, GGR generated from foreign players is taxed with 5% instead of 15%.
Furthermore, a 5% income tax rate is imposed on funds withdrawn by individuals from slot websites. The operator shall withhold such tax when disbursing the winning amount to the player. The recent Amendments exempt the withdrawals of foreign players from such 5% tax, effectively reducing their overall tax burden and potentially increasing their net earnings from such activities.
Tax Regulations for Sportsbooks – Generally, the taxable amount of online sportsbook operators for corporate tax purposes is total bets made. The online sportsbook operator shall pay 7% profit tax on all bets. However, according to the Amendments, for online sportsbook operators whose websites target foreign players, the taxable amount is GGR (not total bets made) and such GGR is taxed at 5%.
Additionally, according to the Amendments, foreign players who win and withdraw money from online sportsbooks, are exempt from the withholding income tax, consequently, creating a tax-free regime for foreign players in Georgia.
Tax Regulations for Casinos – For corporate income tax purposes, the taxable base for online casinos is the GGR. The Standard tax rate for GGR generated from Georgian players is 15%. However, the Amendments have introduced a tax rate of 5% for GGR generated from foreign players. Additionally, a 5% personal income tax is levied on funds withdrawn by individuals from online casino, with the operator responsible for withholding this tax when disbursing winnings. According to the Amendments, foreign players are exempt from this 5% tax on withdrawals, effectively lowering their tax liability and potentially increasing their net earnings.
In conclusion, the Amendments set to take effect on 1 December 2024 mark a significant shift in Georgia’s regulatory landscape for the gambling industry. By introducing more favorable tax conditions for entities that operate online gambling for foreign players, Georgia aims to enhance its attractiveness as a hub for online gambling. These changes reflect Georgia’s move to stimulate foreign investment, promote economic growth, and strengthen its position in the global gambling market. As the implementation date approaches, stakeholders will need to stay informed and adapt to the evolving regulatory framework to fully adapt to the opportunities these Amendments present.
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By Team GT
