Tax haven

Tax haven is usually considered to be a country where the tax laws are favourable for overseas investors. Why places like that exist in the first place? The main purpose of creating "offshore territories" is to attract investors, along with economic projects, to the territories with relatively low economic activity. In the case of many companies, including bookmaker industry, the desire to avoid higher taxes is crucial, which is an obvious and very important thing for the bookmakers and punters alike. The main factors that allow us to argue that the country is a "tax haven":

• Non existent or low taxation of foreign investors;
• Lack of transparency in the tax legislation, some businesses can enjoy the benefits;
• The reluctance of officials of some country to exchange tax information, as well as the information on transfer of funds into such offshore territory implemented by people living in other countries;
• The basic rule of bank secrecy.

There is nothing strange in the fact that online bookmakers have their headquarters in the "tax haven". Where is it?

Since the European law allows bookmakers to conduct activities related to e-gaming, on condition that the accounting and licensing in carried out in the states belonging to the European Union, most of the online bookmakers are headquartered in the Old Continent. As you can see most companies have their headquarters in Malta, Gibraltar and the UK.

We have prepared a small comparison and short description of the countries where the most prestigious online bookmakers “govern". They are:

• Malta - Betsson, Expekt, Unibet;
• Gibraltar - BetVictor;
• UK - Betfair, Sportingbet,
• Austria - Bet-at-home

Malta has stable economy and political situation. In this country there are financial and tax conditions especially attractive for such areas as commerce and electronic banking system, or (which we are very interested in) gambling. Since Malta became a full member of the European Union in May 2004, having received a license issued by the Government of this country, betting companies have access to the European market, as they are respected in Europe. The laws of online gambling are contained in the so-called Remote Gaming Regulations issued by the Government of Malta in early 2004. These laws guarantee security of funds as well as complete anonymity to operators (bookmakers) and the usual punters. The Maltese government can grant permits to organise and conduct gambling, under the condition there are "business opportunities for activities in the field of gambling." We distinguish four types of licenses issued for this type of activity:
1 Class A - for casinos, lotteries and slot machines;
2 Class B - for bets;
3 Class C - for P2P (peer-to-peer), betting exchange, poker tournaments, bingo;
4 Class D - for companies producing software for online bookmakers.

Licenses are issued for five year term with the possibility of extension. Each type of license is taxable, depending on the particular class. In the case of licenses for betting, tax rate makes only 0.5%. It is so important, because according to the European law the company can pay taxes in any chosen EU state without having to re-regulate taxes in the country, where it provides its services to the customer! Many of you are probably asking "ok, but why are not all companies moving their activities to Malta?" The answer is simple. The Maltese market is small and unusually dense. The government of this state creates very favourable conditions for the largest companies operating in specific sectors. Even if we have a license and qualifications to carry out specific activities, if there is already a lot of companies of this sector in Malta, we will not be able to get permission to conduct our economic activity. Offering an attractive tax environment, Malta is one of the most frequently chosen places by bookmakers where they can run their business and guarantee security and complete anonymity to their clients.

Gibraltar is located on the southern coast of Spain. Having small size and relatively small number of people it is an ideal place to conduct business. Bookmaker industry giants know this quite well. Such well-known brand as BetVictor has its office there.  Rules concerning the e-gaming activities in Gibraltar are more severe than the ones in Malta. This is due to the fact that British territory has been criticised for offering attractive terms of investment to foreign companies. Criticism comes from the EU countries. What attracts companies that provide online gambling services in Gibraltar, is the possibility of establishing joint ventures that do not have to pay taxes, under the condition that the income comes from areas out of the "offshore territory". In fact, all companies providing services at betting sector on the basis of special privileges and contracts with the Government of Gibraltar, are subject to a symbolic 1% tax on the games, moreover, this amount cannot exceed 425,000 pounds per year. Besides, other costs are those associated with the activities and an annual payment for not being a resident of Gibraltar.

Moreover, the main requirement for starting and carrying out economic activities in the tax haven is to possess 2 million pounds which is not a problem for wealthy investors. In addition, Gibraltar offers other attractive tax benefits. There is no tax on financial income, inheritance, gifts, even on income from savings accounts. There are no sales tax and VAT. Looking at the betting industry giant - BetVictor, we can clearly see profitability of investment in the e-gaming in this country. Although BetVictor is not the resident of this state (does not carry out its activities there) it is entirely free from the income tax, which will be imposed on the territory of Gibraltar (previously mentioned 1%). The advantage of this "tax haven" in relation to other countries of this type is the absence of payment for the "starter license", which is partly made up for by the annual payment of 2000 pounds for the use of gambling software. Unfortunately due to the pressure on the British Isles from other EU member states, the colony is losing its status of "tax haven", which is confirmed by a gradual exchange of tax information with other countries: Australia, Austria, Belgium, Denmark, USA, UK, Finland, France, or recently with Germany.