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Gambling taxes and barriers in Cyprus

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Taxes

General

V.A.T. is generally not levied on revenue flows generated by gambling activity in Cyprus. Exceptions have been made (According to a letter of 31 August 2001, sent to us on behalf of the Permanent Secretary of the Ministry of Finance of the Republic of Cyprus. The letter does not indicate the legislative basis of these exceptions and we have not been able to identify them from the limited material otherwise available to us in respect of Cypriot law.) for the commissions retained by “receivers of collective bets”, “assistant receivers of collective bets” and agents of the Nicosia Racing Club from the gross betting revenues which they turn over. Those commissions attract V.A.T. at the rate of 15%.

Lotteries

The whole of the net proceeds of the Cyprus Government Lottery are paid into the public consolidated revenue fund and no special tax is levied on lottery revenues.

Casino Gaming

The operation of casino games in Cyprus is prohibited, so no taxes are imposed in this sector.

Machine Gambling Outside Casinos

The operation of gambling machines outside casinos is prohibited in Cyprus, so no taxes are imposed in this sector.

Betting

The Greek OPAP, which is permitted to operate in Cyprus through a local subsidiary company, pays into the Cypriot public consolidated revenue fund a substantial part of its net revenue generated in Cyprus from pool betting on the outcome of football matches. No special tax is levied on its activities.

Under sec. 3 of the Taxation of Horseracing Bets and Sweepstakes Law 1973, as amended, tax is payable by punters at the rate of 10% of the gross amount staked. We have been informed (By a letter of 31 August 2001, sent on behalf of the Permanent Secretary of the Ministry of Finance of the Republic of Cyprus. The letter does not indicate the source of law underpinning this municipal tax and we have not been able to identify it from the limited material otherwise available to us in respect of Cypriot law.) that the Nicosia Race Club pays tax to the local municipality of Agios Dometios at the rate of 1% of the gross amount of all bets taken by the Club. As the Club enjoys a monopoly right to take bets in Cyprus on the outcome of horseracing, this obligation effectively brings the total tax burden to 11%.

Under subsec. 8(2) of the Collective Bets (Regulation and Taxation) Law 1997, all other lawful pool betting is subject to tax at the rate of 25% of the gross amounts staked.

Licensed “receivers of collective bets” are required by subsec. 3(7) to pay annual license fees of CYP£5’000.- (approx. €8’700.-). According to statistical information received, (From the Ministry of Finance of the Republic of Cyprus, in the same letter of 31 August 2001. The relevant statistics are those concerning the total tax revenue received from “Collective Bets on Sports Events” including football matches but not horseracing, as well as the total number of licensed “receivers of collective bets”.) this is about 1% of the average total sum of tax paid annually by individual receivers. The effective total tax burden on non-horserace pool betting may therefore be considered to amount to 26%.

Bingo

On the basis of the limited information available to us, (Some valuable general background information was provided to us by SAKOP in a letter dated 19 August 2005. In a letter of 31 August 2001, sent to us on behalf of the Permanent Secretary of the Ministry of Finance of the Republic of Cyprus, bingo is mentioned only to the effect that no economic and statistical information about it is available. This is perfectly consistent with the thesis that no taxes are levied on bingo.) it appears that no tax is levied on bingo played in Cyprus, whether in the traditional form offered by charitable associations and sporting clubs, nor in the commercial form offered by the Cyprus Broadcasting Corporation.

Media Gambling Services

To the very limited extent that media gambling services may lawfully be provided in Cyprus, they are apparently not subjected to taxation.

Sales Promotional Gambling

The operation of commercially lucrative sales promotional games in Cyprus is prohibited, so no taxes are imposed in this sector.

Charity Gambling

On the basis of the limited information available to us in respect of charity gambling services supplied in Cyprus, it appears that they are not subjected to taxation.

LISTING

LEGISLATION ENACTED

General

– Law No. 185(I) of 2004 amending the Prevention and Suppression of Money Laundering Activities Laws
– Law No. 118(I) of 2003 amending the Prevention and Suppression of Money Laundering Activities Laws
– Law No. 152(I) of 2000 amending the Prevention and Suppression of Money Laundering Activities Laws
– Law No. 120(I) of 1999 amending the Prevention and Suppression of Money Laundering Activities Laws
– Prevention and Suppression of Money Laundering Activities Laws 1996 to 1998

Lotteries

– Lotteries Law (Chapter 74 of the Statute Laws of Cyprus, as amended, most recently by Law No. 3014 of 3 November 1995)
– Lotteries Regulations 1974, as amended (most recently on 22 November 2002)

Casino Gaming

– Law on Betting Houses, Gambling Houses and the Restriction of Gambling (Chapter 151 of the Statute Laws of Cyprus, as amended, most recently by Law No. 15(I) of 1998)

Machine Gambling Outside Casinos

– Law on Betting Houses, Gambling Houses and the Restriction of Gambling (Chapter 151 of the Statute Laws of Cyprus, as amended, most recently by Law No. 15(I) of 1998), section 6A (Apparently due to some insufficiencies of legislative drafting, this Law contains two adjacent sections, both numbered 6A. The section concerning gambling machines is the second of these, introduced by Law No. 23 of 1965 and modified by Law No. 166 of 1987.)

Betting

– Law Ratifying the Inter-Governmental Agreement between Cyprus and Greece concerning OPAP (Law No. 35(III) of 2003)
– Collective Bets (Regulation and Taxation) Law 1997, Law No. 75(I)/97, as amended by Law No. 176(I) of 2004
– Taxation of Horseracing Bets and Sweepstakes Law 1973 (Law No. 48 of 1973), as amended by Law No. 23 of 1976 and Law No. 28(I) of 1999
– Collective Bets (Regulation and Taxation) Regulations, No. 102 of 1998

Bingo

– No legislative provision is expressly made for gambling in the form of bingo in Cyprus.

Media Gambling Services

– Lotteries Law (Chapter 74 of the Statute Laws of Cyprus, as amended, most recently by Law No. 3014 of 3 November 1995), section 8

Sales Promotional Gambling

– Lotteries Law (Chapter 74 of the Statute Laws of Cyprus, as amended, most recently by Law No. 3014 of 3 November 1995), section 8

Charity Gambling

– Lotteries Law (Chapter 74 of the Statute Laws of Cyprus, as amended, most recently by Law No. 3014 of 3 November 1995), sections 6, 7 and 15(b)

BARRIERS

Panorama

General

The Cypriot legislation aimed at preventing and punishing money laundering does not constitute a barrier to free movement of gambling services. We have not been provided with copies of all of the relevant legislation (the 2000 and 2003 amendments are not at our disposal). From what is available to us however, it is reasonable to conclude that Cypriot gambling operators have not been classified as engaged in “relevant financial business” and that the special legislative procedures which must be followed by persons engaged in “relevant financial business” do not apply to gambling operators. (The Head of the Unit for Combating Money Laundering, established in the Law Office of the Republic of Cyprus, has informed us that no statistical information is available concerning the incidence of money laundering through gambling operations of any type in Cyprus. She also noted (presumably by way of justification) that no casinos are currently operating in Cyprus. )

Lotteries

According to sec. 10 of the Lotteries Law, every lottery is illegal. Various related criminal offences are established by sec. 11, including the sale, purchase or distribution of foreign lottery tickets and the advertisement of or attempt to enter a foreign lottery in Cyprus. Other provisions of the Law make exceptions to the general prohibition. Sections 6 and 7 and para. 15(b) concern non-commercial lotteries. The only exception that could encompass commercially oriented lotteries is contained in sec. 9, which states that Part III of the Law is not applicable to government lotteries. Part II of the Law indeed makes provision for the operation of the Cyprus Government Lottery. The combined effect of these provisions is that Cypriot law establishes and protects a national monopoly in the supply of commercial lottery services.

Casino Gaming

Subsec. 3(1) of the Law on Betting Houses, Gambling Houses and the Restriction of Gambling makes it a criminal offence, punishable by imprisonment for up to one year and/or a fine of up to CYP£1’000 (approx. €1’700), to manage, use or permit the use of premises for the playing of games which, according to sec. 6, include common casino games like craps and roulette. Subsec. 6(1), which was amended in 1987 and 1998, itself makes it a criminal offence, punishable to the same extent as the offences created by subsec. 3(1), for a person wherever located to play, or to get together with other persons for the purpose of playing, those games. It would appear that the object of subsec. 6(1) is to include casino gaming conducted by means of communications technology within the general criminal prohibition. The only legislative exception provided to these prohibitions is to be found in the first sec. 6A, (Introduced by Law No. 15(I) of 1998.) which permits district prefects to issue licenses for the conduct of a traditional game called “kajadee”, normally as a kind of sideshow on streets or squares in the single district for which the holder may be licensed at any one time. The combined effect of the provisions is accordingly to establish a complete legal barrier to the supply of casino gaming services in Cyprus.

Machine Gambling Outside Casinos

In the Law on Betting Houses, Gambling Houses and the Restriction of Gambling, the second section 6A (Introduced by Law No. 23 of 1965 and modified by Law No. 166 of 1987.) makes it a criminal offence, punishable by imprisonment for up to two years and/or a fine of up to CYP£1’500 (approx. €2’550), to manufacture, import, possess, use or offer any slot machine for use in Cyprus. There are no legislative exceptions to this prohibition. The effect of this provision is accordingly to establish a complete legal barrier to the supply in Cyprus of machine gambling services outside casinos.

Betting

Two Cypriot laws permit the commercial supply in Cyprus of gambling services in the form of “collective bets”, which term essentially refers to totalisator and other pool betting, but is defined to include any kind of betting where the prize paid out to a winner does not depend on fixed odds. Those laws constitute exceptions to the general prohibition of provision of betting services that is laid down by the Law on Betting Houses, Gambling Houses and the Restriction of Gambling. Sec. 3 makes it a criminal offence to manage, use or permit the use of premises as a “house of bets”, which term is defined to include any kind of betting shop or other premises from which betting services are offered or organised. As there is no similar legislative exception for fixed-odds or bilateral betting services, we must conclude that Cypriot law imposes a complete barrier to the supply of any and all such fixed-odds betting services.

The Taxation of Horseracing Bets and Sweepstakes Law 1973, together with the Collective Bets (Regulation and Taxation) Regulations 1998, effectively assures to the Nicosia Race Club a monopoly on pool betting in Cyprus on the outcome of horse races. That Law makes it a criminal offence to bet on horse racing otherwise than by use of coupons or other documents issued by the Nicosia Race Club, which in fact issues them only to its authorised agents. The Regulations oblige licensed betting shops, if they wish to offer bets on horse races held in Cyprus, to obtain the permission of the Nicosia Race Club.

The Collective Bets (Regulation and Taxation) Law 1997 foresees that pool betting will be offered in Cyprus by “collective bet companies”, which do not need to be incorporated or registered in Cyprus, but which must each have paid up share capital of at least approx. €175’000 and which must have the supply of pool betting services as their only object. The Law imposes a compulsory licensing regime on “receivers of collective bets”, which are defined as persons who receive or negotiate collective bets or otherwise engage in the business of collective betting as agents of a collective bet company, as well as on “assistant receivers of bets, which are defined as persons who do the same thing as agents for those agents! Under the Collective Bets (Regulation and Taxation) Regulations 1998, these licensees may offer pool betting on football or basketball matches, on any other sporting competition or other event which is authorised by the relevant Cypriot minister, or on horse races if authorisation is obtained from the Nicosia Race Club. Betting is allowed on international matches involving a Cypriot team, including a national team representing Cyprus, only if the result also depends on at least three foreign teams. Only natural persons having Cypriot or EU nationality, or corporate persons registered in Cyprus as companies limited by shares, may be licensed to act as receivers or assistant receivers. Licensees are normally also required to obtain licenses in respect of each of the premises in which they operate and to keep at those premises a government approved cash register for marking betting coupons. Any person, whether as provider or as consumer of betting services, who enters into a pool bet other than by means of such marked coupons, commits a criminal offence. To the extent that customers’ legal rights depend upon the marked coupons, this legislative provision effectively prevents any kind of remote pool betting in Cyprus and in any case makes it illegal for operators outside Cyprus to supply pool betting services to Cyprus.

It is worth noting that Cypriot legislation has made provision for the issuance of licenses to persons wishing to offer pool betting services on a purely “offshore” basis. Subsection 12(1) of the Collective Bets (Regulation and Taxation) Law 1997 expressly permits the Cypriot government to promulgate regulations providing for the grant of pool betting licenses to “offshore companies”. These are defined in subsec. 12(2) as companies which are incorporated, registered, managed and controlled in Cyprus, but owned exclusively by persons who do not have Cypriot nationality and which are in the business of offering pool betting services outside Cyprus on events taking place in Cyprus. As no such regulations or licenses have apparently been issued to date, these provision may not constitute a barrier in themselves, but rather confirm the finding that operators in other EU Member States are not permitted to supply pool betting services to the Cypriot market.

Bingo

No express statutory provision has been made for bingo services offered in Cyprus. It would appear from the wording of the definition of the term, “being involved in gambling”, which appears in sec. 2 of the Law on Betting Houses, Gambling Houses and the Restriction of Gambling, that bingo would fall within the scope of the general criminal offence of engaging in gambling in a house of gambling, as provided by sec. 4. In the alternative, if bingo falls within the scope of the Lotteries Law, as is thought in Cyprus, it would be illegal to provide commercial bingo services without a license. It has been reported that bingo is in fact quite popular in Cyprus and that many sporting associations and charitable organisations actually raise money from bingo without obtaining licenses. Sporting associations are able to do this under secs. 6 and 7 of the Lotteries Law, which, under restrictive conditions, permit the operation of small scale lotteries incidental to certain entertainments and at private occasions respectively. Charities are able to do this under para. 15(b) of the Lotteries Law. This means that commercial bingo services could not lawfully be provided in Cyprus by commercial operators established in other EU Member States and we conclude that the relevant provisions constitute a barrier to the free movement of bingo services into Cyprus.

Media Gambling Services

Subsec. 8(1) of the Lotteries Law makes it unlawful to run a prize competition through or by means of any newspaper, if the result is determined by chance or prediction, rather than by the exercise of skill. Subsec. 8(2) provides imprisonment for up to six months, or a fine, or both as punishments for the criminal offence which is committed by anyone who contravenes that prohibition. This is clearly a barrier to the supply of media gambling services by newspaper proprietors, at least to the extent that games based mostly on chance are more attractive to players and thus more commercially lucrative that competitions based on the exercise of skill.

It should be noted that the “Super Bingo” product being offered by the Cyprus Broadcasting Corporation may be characterised as a media gambling service. If we have understood the situation correctly, this involves a media operator offering a gambling service, namely bingo or a form of lottery, in the hope of generating profits for itself. The Cyprus Broadcasting Corporation is offering this service under a lottery license which it alone is permitted to obtain under sec. 15 of the Lotteries Law.

Most if not all other prize competitions run by and for the benefit of media operators in Cyprus would indeed be likely to fall within the Lotteries Law’s very wide definition of a lottery. Indeed, subsec. 8(2) states that the fact that a person has committed the offence of running an unlawful prize competition does not prevent the prosecution of that person for running an illegal lottery.

The result of all these provisions is effectively that the Cyprus Broadcasting Corporation has been accorded a monopoly right to offer commercially lucrative media gambling services in Cyprus.

Sales Promotional Gambling

The general prohibition of media prize competitions laid down by subsec. 8(1) of the Lotteries Law also applies to sales promotional prize competitions. Thus, it is unlawful in Cyprus to offer a prize competition, the outcome of which does not depend upon the exercise of skill, if the offer relates to the sale of any item to the public or to a business or undertaking which sells any item to the public. Again, most if not all sales promotional prize competitions would also be likely to fall within the broad scope of the general prohibition imposed by Cypriot law on the organisation of lotteries. We are not aware of any exceptions to these restrictions and conclude that the relevant provisions impose a complete barrier to the supply of commercially lucrative sales promotional gambling services in Cyprus.

Charity Gambling

In addition, it appears that sporting associations and charitable organisations are permitted to provide bingo services in Cyprus for their own profit, without having to obtain any licenses.

These factors do not of themselves mean that charitable gambling service providers established in other EU Member States could undertake activities in Cyprus without fear of prosecution, but they do require us to conclude that there is no clear barrier to the free movement of charity gambling services into Cyprus.

© European Union

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