The Danish Act on Gaming

Date 28 sep. 2010

 

On 12 February 2010, a draft for a new Act on Gaming ("Act") was presented in public hearing.

 

The final bill was passed by the Danish Parliament June 4 and will come into force 1 January 2011.

 

The Act includes provisions to end the existing gaming monopoly and to liberalise the market. Today, the Danish gaming market is regulated in such a way that commercial actors are excluded, only allowing certain public benefit organisations and state controlled companies to offer gaming activities. The Act will be part of a legislative package also containing an Act on Duty on Gambling, an Act on Distribution of Profits from Lotteries and Betting on Horse and Dog Racing, and an Act on Danske Spil.

 

The Act on Gaming includes provisions on various aspects of the gaming market. This overview will focus on the Act’s definitions of the different types of gaming that fall within the scope of the Act, as well as the provisions on licenses for providers of the different types of gaming.

 

The Definition of Gaming

Gaming provided or arranged in Denmark falls within the scope of the Act. The Act defines and divides gaming into three main areas: Lottery, combined gaming and wager.

 

Lottery is defined as an activity in which a participant gets a chance to win a prize, and where the winner is decided solely by chance. Examples hereof are the National Lottery, Joker, state lottery, Bingo, and scratch games.

 

Combined gaming is defined as an activity, in which a participant gets a chance to win a prize, and where the winner is decided by a combination of skill and chance. Examples hereof are bridge, poker, backgammon, whist, and guessing competitions, if decided by a prize draw. Moreover, any gambling based solely on skill may be fall under this definition if an element of chance is added in determining the winner, e.g. a prize draw between the best players.

 

Wager is defined as an activity in which a participant gets a chance to win a prize by wagering on either a future event or the occurrence of a future event. Examples hereof are wagers on a race or a sports game.

 

 

Gaming Licenses

Providing any type of gaming as defined by the Act will require a license. Licenses are granted by the Gaming Board unless otherwise stated. An exception is made for gaming where no stake is paid in order to participate, in which case a license will not be required. Additionally, a license will not be required, if the gaming in question is exempt from the license requirement pursuant to the Act on Gaming or another act.

 

The availability of a license is dependent on the type of gaming in question. Some types of gaming licenses are exclusive and only granted to a sole provider, while other types may be granted to an indefinite number of providers. The duration of the various licenses vary, and some can be granted for an unlimited duration.

 

As some types of gaming resemble each other, the Act often defines a license negatively.

 

There will be nine different types of licenses, which are as follows:

  • A lottery license. The Act states that a license for providing lottery is granted exclusively to Danske Spil A/S who, up until the Act becomes effective, has been granted the license to provide lottery pursuant to the Act on Tips and the National Lottery. The types of lottery included under this license are Lotto, scratch games, Joker, Keno, Online Bingo, and Boxen.
  • A state lottery license. The Act states that licenses for providing state lotteries are granted to the National State Lottery A/S, Landbrugslotteriet, and Varelotteriet, who, up until the Act becomes effective, have been the three state lotteries to hold licenses pursuant to the Act on State Lotteries and the Act on Prohibition of Lotteries.
  • A non-profit lottery license. This type of license will be non-exclusive. Today, pursuant to circular letter no. 147 of 1 August 1994, only associations domiciled in Denmark are able to obtain such a license. When the Act becomes effective, it will be possible for any non-profit association to be granted a license for the purpose of providing non-profit lotteries for charity.
  • A wager license. This type of license will be non-exclusive, and will be granted for a period of up to five years at a time. The explanatory notes of the Act suggest that the market should be open to new commercial actors, making them able to obtain licenses to provide wagers, both land-based and online. No specific types of wagers are determined in these provisions, making a wide range of wagers possible, although certain limitations apply. Fixed odds gambling and live betting will be included under the license, as well as land-based Trackside.
  • A horse and dog wager license. The Act states that such license is granted exclusively to Danske Spil A/S, who, under the name of Dantoto up until the Act becomes effective, has been granted the license to provide horse and dog wagers pursuant to the Act on Tips and the National Lottery.
  • A local pool wager on bicycle races on track, dog races on track, pigeon races, and horse races license. This type of license will be non-exclusive and will be granted for a period of up to three years at a time. The provisions on local pool wagers is a consolidation of Sections 1 and 1(A)(1) of the Act on Local Betting, see the 22nd consolidated Act of 16 January 2006, and no changes are intended.
  • A land-based casino license. This type of license will be non-exclusive and will be granted for a period of up to ten years at a time. The license will include establishing and running a casino providing roulette, baccarat, punto banco, black jack, poker, and gambling on prize paying gambling machines, but other types of gambling may be allowed as well. In addition, a license may be limited to only one or more types of gambling. Certain organisational requirements must be met by the provider in order to obtain the license. Additionally, compliance with terms prescribed by the Minister of Taxation is also required.
  • An online casino license. This type of license will be non-exclusive and will be granted for a period of up to five years at a time. The license will include providing roulette, baccarat, punto banco, black jack, poker, and gambling on prize paying gambling machines in an online casino, thereby in principal making it possible to provide the same types of gambling as provided by a land-based casino. The explanatory notes of the Act state that poker providers should be able to offer poker games, in which Danish players may play against poker players from other countries in an open network, in order to create a poker network with a large cash flow. Within these networks, the games must comply with Danish legislation, be supervised by the Gaming Board, and the provider must pay duties on the part of the stake that relates to Danish clients. Other types of gambling may be allowed as well, including whist, hearts-free, yatzy, ludo, bridge and backgammon. A license may be limited to only one or more types of gambling.
  • A prize paying gambling machine license for arcades and restaurants owning an alcohol license. This type of license will be non-exclusive and may be granted indefinitely, contrary to the current legislation. The license will include installing and operating such machines. Regulation on prizes, providing other types of gambling, entry requirements, and more will apply as well. As for restaurants, a maximum of three machines will be allowed per restaurant.

Terms for Obtaining Licenses

The Act states that licenses may be granted to both persons and companies.

 

Persons will have to comply with a set of requirements set forth in the Act:

  • A person must be at least 21 years of age.
  • A person may not be under guardianship or co-guardianship pursuant to Sections 5 and 7 of the Guardianship Act.
  • A person may not have applied for an administration order, filed a petition for compulsory composition, bankruptcy, or debt rescheduling, or be under administration order, have gone into bankruptcy proceedings, debt rescheduling, or compulsory composition.
  • A person may not have been convicted of a crime which may substantiate obvious risks of abuse of the possibility to work with gambling.
  • A person may not have government debt that is due. This does not include instances where a repayment arrangement has been made or where collateral has been provided.

Companies will have to comply with the same requirements as persons, although not including the requirements concerning age and guardianship/co-guardianship. However, members of the management and the board of directors must comply fully with all the requirements that apply to persons, and the Gaming Board must be notified of any changes of personnel within these groups.

 

A license may be granted to companies which are established within Denmark or another EU- or EEA-country. A license may also be granted to companies established within a non-EU or non-EEA-country if a representative domiciled in Denmark is appointed by the applicant. This representative must be authorised by the Gaming Board and comply fully with the same requirements as personal applicants. Such authorisation may be revoked if certain requirements are no longer met.

 

Licenses may only be granted to persons and companies if it is probable that they will be able to provide gambling in an economically safe manner and are professionally qualified. A license may not be granted if a conduct causing reasonable doubts about the propriety in the running of the company has been shown by the applicant itself, members of the management or the board of directors, or others who may exercise a controlling influence on the daily operations of the company.

 

Public order and the size and location of the venue may be taken into consideration when considering applications for land-based casino licenses and prize paying gambling machine licenses for arcades.

 

Terms may apply to a license.

 

The Gaming Board supervises persons and companies who have been granted a license pursuant to the Act.

Licenses may be revoked by the Gaming Board under certain conditions, e.g. if the license holder or its representative substantially or repeatedly violates the provisions of the Act.

 

Licenses may also lapse under certain circumstances, e.g. if requested by the license holder or if the license is not actively used within certain time-limits.

 

Taxation

Gambling revenues are subject to the Act on Duty on Gambling.

 

The Act on Duty on Gambling applies to the same types of gambling defined by the Act on Gaming, and uses the same definitions.

Three different kinds of taxation may apply, depending on the type of gambling in question. Those three are:

  • Taxation of the gross gambling revenue. The gross gambling revenue is the gambling provider’s profits, defined as the amount by which the payment sums exceed the winnings.
  • Taxation of the winnings. This type of taxation is equal to a certain percentage of the winnings paid out to the players. The percentage is dependent on the relevant type of license, as outlined below. The provider is required to withhold the taxes before paying out the winnings, and is liable for the amount. Thus, the effective tax burden is placed on the players.
  • Taxation of the payment sums. This type of taxation equals a certain percentage of the payment sums paid in total for a particular type of gambling. This percentage is similarly dependent on the relevant type of license, as outlined below.

The way in which the nine different types of gambling licenses are subject to taxation is as follows:

  • The lottery license holder must pay a tax of 15 % on all winnings that exceed EUR 27.
  • State lottery license holders must pay a tax of 15 % on all winnings that exceed EUR 27. Additionally, the National State Lottery A/S must pay a tax of 6 % of the payment sum.
  • Non-profit making lottery license holders must pay a tax of 15 % on all cash winnings that exceed EUR 27. All non-cash winnings, whose value exceed EUR 27, are subject to a 17,5 % tax on that excess value.
  • Wager license holders must pay a tax of 20 % of the gross gambling revenue. If wagers are handled through a wagering exchange, the license holder must pay a tax of 20 % of the commission payments.
  • The horse and dog wager license holders must pay a tax of 11 % of the gross gambling revenue. Moreover, monthly gross gambling revenues that exceed EUR 2,239,500 are subject to an additional tax of 19 %.
  • Local pool wager on bicycle races on tracks, dog races on tracks, pigeon races, and horse races license holders must pay a tax of 11 % of the payment sums, but may deduct EUR 2,700 (2010) per race day, for a maximum of 24 race days per year.
  • Land-based casino license holders must pay a tax of 45 % of the gross gambling revenue, and may deduct the value of certain tokens. Moreover, if the gross gambling revenue deducted by the value of those tokens exceeds EUR 536,000, that excess is subject to a 30 % tax. When hosting tournaments, the taxable amount is at least 4 % of the total payments in the tournaments.
  • Online casino license holders must pay a tax of 20 % of the gross gambling revenue. For online gambling involving commission, the license holder must pay a tax of 20 % of the commission payments.
  • Holders of licences for prize paying gambling machines for arcades and for restaurants owning an alcohol license must pay a tax of 41 % of the gross gambling revenue.

For prize paying gambling machines in restaurants owning an alcohol license, gross gambling revenues that exceed EUR 4,000 in the taxable period is subject to an additional tax of 30 %.

 

For prize paying gambling machines in arcades, gross gambling revenues that exceed EUR 33,500 in the taxable period, is subject to an additional tax of 30 %. This threshold amount is adjusted upwards as follows: the license holder may add EUR 400 per machine for the first 50 machines, and EUR 200 for any additional machines hereafter. Tax reductions are possible if a holder of a license for prize paying gambling machines in arcades distributes funds to charitable purposes, as defined by the Act.

 

Holders of licenses for providing gambling in connection with public amusements, as defined by the Police Act, must pay a 17,5 % tax on winnings, whose value exceed EUR 27. Only the value that exceeds EUR 27 is subject to taxation.

 

If no license or registration with the Gaming Board is required for a specific gambling activity, and if the activity can be regarded as public, the person or company providing the activity must pay a tax of 15 % on winnings, whose value exceed EUR 27. Only the value that exceeds EUR 27 is subject to taxation. All non-cash winnings, whose value exceed EUR 27 are subject to a 17,5 % tax on that excess value.

 

Persons and companies who are subject to taxation pursuant to the Act on Duty on Gambling must register their taxable activities with the Danish Tax and Customs Administration.

 

 

Application Fees and Annual Fees

When applying for a wager license or an online casino license, the applicant must pay an application fee of EUR 33,500 (2010). When applying for a wager license and an online casino license simultaneously, the total fee is reduced to EUR 47,000 (2010).

 

For wager and online casino licenses, the license holder must pay a fee that is calculated based on the annual taxable gambling revenue. Those fees are as follows:

  • For revenues not exceeding EUR 670,000, a license holder must pay a fee of EUR 6,700.
  • For revenues equal to or greater than EUR 670,000, but not exceeding EUR 1,340,000, a license holder must pay a fee of EUR 33,500.
  • For revenues equal to or greater than EUR 1,340,000, but not exceeding EUR 3,350,000, a license holder must pay a fee of EURO 60,300.
  • For revenues equal to or greater than EUR 3,350,000, but not exceeding DKK 6,700,000, a license holder must pay a fee of EUR 87,000.
  • For revenues equal to or greater than EUR 6,700,000, but not exceeding EUR 13,400,000, a license holder must pay a fee of EUR 114,000.
  • For revenues equal to or greater than EUR 13,400,000, a license holder must pay a fee of EUR 202,000.

If the actual gambling revenue exceeds the basis on which the fee is paid, the difference between the paid fee and the actual applicable fee must be paid. Similarly, the license holder will receive a refund, if the holder has paid a greater fee than required.

 

 

The fee must be paid annually. 

 

 

The Minister of Taxation may draft provisions regarding additional fees for the handling of applications and issuance of licenses, as well as annual fees to cover administrative and supervisory expenses.

 

If you have any questions or require additional information on the act on gaming, please contact Attorney Claus Molbech Bendtsen (cmb@mwblaw.dk) or Attorney Dan Moalem (dmo@mwblaw.dk).  

 

The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis for decisions or considerations.