Reading of new Rules in Gambling Legislation

Date 13 maj. 2015
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Introduction

On 21 April 2015, the Danish Parliament conducted its first reading of a new bill. So far the Bill has been supported by the Danish People’s Party, the Danish Liberal Party (Venstre) and the Danish Social Democrats. The Bill introduces changes to the gambling legislation, including the Danish Act on Gambling, the Danish Gambling Tax Act, the Danish Act regarding certain games in Greenland, the Danish Act on Public Poker Tournaments and the Danish Tax Assessment Act.

 

The proposed amendments are the result of two agreements concluded in the Danish Parliament on the basis of experience and a number of concrete requests from the gambling providers.


The Bill will introduce an adjusted tax scale for wagers and online casino, a prolongation of the accounting period for taxes from the current week to a month, and forced hours for arcades with prize-paying gambling machines, among other things.

 

The most significant Changes

 

Amendments regarding Wagers and Online Casino

In accordance with the current fee structure, major gambling providers pay a relatively low fee compared to the gross gambling revenue of the provider in question. Meanwhile, minor gaming providers pay a relatively high fee compared to their gross gaming revenue. This fee structure provides for an unintended competitive advantage for major gaming providers who currently experience a charge of 20-21%, whereas minor gaming providers experience a charge of 22-25%. If the Bill is passed, a revised progressive fee structure will be introduced ensuring proportionality between the gambling providers’ gross gambling revenues and their experienced charge. To ensure this, more stages in the fee structure will be introduced. However, the amendments only imply redistribution, and so it is estimated that the total fee revenue will remain unchanged, whereas the aforementioned charge is leveled off for all gambling providers. The current fee structure and the revised fee structure, as contained in the Bill, are illustrated below.

 

 

The current Fee Structure

 

Fee Structure contained in the Bill

Gross Gambling Revenue

Fee Amount

 

Gross Gambling Revenue

Fee Amount

Under DKK 5,000,000

DKK 50,000

 

Under DKK 5.000.000

DKK 50,000

From DKK 5,000,000 to DKK 10,000,000

DKK 250,000

 

From DKK 5,000,000 to DKK 10,000,000

DKK 125,000

From DKK 10,000,000 to DKK 25,000,000

DKK 450,000

 

From DKK 10,000,000 to DKK 25,000,000

DKK 225,000

From DKK 25,000,000 to DKK 50,000,000

DKK 650,000

 

From DKK 25,000,000 to DKK 50,000,000

DKK 450,000

From DKK 50.000.000 to DKK 100,000,000

DKK 850,000

 

From DKK 50.000.000 to DKK 100,000,000

DKK 800,000

From DKK 100,000,000 and above

DKK 1,500,000

 

From DKK 100,000,000 to DKK 200,000,000

DKK 1,500,000

 

 

 

From DKK 200,000,000 to DKK 500,000,000

DKK 2,500,000

 

 

 

From DKK 500,000,000 and above

DKK 4,500,000

 

Amended Accounting Period

To ease the administrative burden on the gambling providers, the Bill contains an amendment to the accounting period from a week to a month. This change derives from concrete requests from the gambling providers as they have pointed out that the short weekly accounting period results in both a significant administrative burden as well as negative gross gaming revenues and consequently a negative basis for calculating fees in periods with few deposits from players and high winnings. 

 

Information contained in annual Statements

The Danish Gambling Authority’s audits and dialogues with the gambling providers have shown that certain information, which the gambling providers are obligated to publish in their annual statements, may be in the nature of trade secrets. In accordance with current legislation, the gambling providers are obligated to publish a statement on the companies’ key figures and a report on how the companies have complied with the requirements to the provision of such games. To avoid publication of trade secrets, the Bill seeks to amend the obligation so that going forward, the information is only to be reported to the Danish Gambling Authority. 

 

Amendments for Arcades

Pursuant to the current rules, it is possible to bypass the liability to pay taxes when arcades distribute money to charitable associations subject to a 95% discount in the tax. The Bill will terminate this arrangement by 1 January 2016. A temporary arrangement will be introduced, whereby charitable associations that have rightfully received such contributions in the past may receive subsidies. Such subsidies are charged to an DKK 80m pool established under the Danish Tax Authority. The temporary arrangement is to ensure that associations entitled to receive contributions are not prevented from receiving such contributions as a consequence of the introduced legislation. The arrangement is scheduled to be reevaluated in 2016. The subsidy is achieved by application and the applicant is subjected to SKAT’s right to conduct audits.

 

According to the current rules, arcades with gambling machines may be open 24 hours a day. The Bill seeks to introduce forced hours, thus only allowing the arcades to provide gambling services between 07.00 and 24.00. The amendment is intended to limit the number of people developing gambling addictions and to limit the consequences for people who already suffer from a gambling addiction. Moreover, the opening hours of 7.00 to 24.00 are intended to limit the use of clandestine work. Restaurants with alcohol licenses and permission to establish and operate gambling machines will be obligated to turn them off during the period in question.

 

Furthermore, the Bill will increase the minimum deposits and winnings limits on gambling machines from DKK 0.50 and DKK 300 to DKK 1 and DKK 600. If the amendments are passed, they will enter into force on 1 July 2015. The new limits are to ensure that gambling machines, despite the forced hours, remain an attractive legal market.

 

Harmonization of Tax Winnings

The Bill will introduce a harmonization of the tax winnings on product and cash winnings in lotteries, state lotteries, charitable lotteries, games without stakes and premium savings. Whereas the current tax on cash winnings is 15% and 17.5% on the value of product winnings with a base deduction of DKK 200, the introduced harmonization will mean a 17.5% tax on the net winnings above DKK 200 for both product and cash winnings.

 

Our Assessment

Provided that the Bill is passed, it is our assessment that the amendments to the fee structure and the accounting period will benefit the gambling providers in that the administrative burden, which the gambling providers have been experiencing by the unusually short accounting period, is expected to be eased.

 

Moreover, the amendment to the fee structure will reduce the tax burden on minor gambling providers, thus the current uneven impact and the competitive advantage for major gambling providers as a consequence hereof will be leveled off. Thus, it is our assessment that the amendments will make it easier to conduct business in relation to the provision of wagers and online casinos in Denmark.

 

The intended forced hours may influence the aggregate revenue of arcades open 24 hours a day and restaurants with permissions to establish and operate gambling machines. As a direct compensation for the lost revenue in the hours between 24.00 and 07.00, the minimum deposit and winnings limit will be doubled to DKK 1 and DKK 600 respectively. The actual effect of the forced hours if the Bill is passed thus remains uncertain.

 


If you have any questions or would like additional information regarding the above, please contact Partner Pernille Nørkær (pno@mwblaw.dk) or Junior Associate Jesper Philip Schmidt (jps@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 of decisions or considerations.