Armenia to harmonise tax charges on gambling winnings

Armenia continues to modify its gambling regime, as Parliament has approved a package of new amendments to rectify existing laws related to gambling.

Approved on Wednesday, 12 June, legislative changes will introduce new tax charges on ‘gambling winnings’, categorised as “large win” and “regular win” for customers.

A “large win” is defined as any single win exceeding 5 million drams (approximately €11,000), which will be subject to a 5% income tax, sanctioned as a measure intended to ensure that significant gambling profits are ‘adequately taxed’.

For smaller wins, consumers will be required to calculate the net winnings, as the difference between the total winnings and the bets placed. The ‘net win amount’ will then be subjected to a 10% income tax.

The distinction aims to simplify the taxation process for frequent, smaller wins, and ensure that gamblers pay their fair share based on actual profits.

The changes mark a shift in Armenia’s approach to gambling taxation. Previously, large wins were taxed at a higher rate of 10%, with gambling companies acting as tax agents. However, the new taxation framework ensures a fairer and more manageable process for both gamblers and the companies involved in gambling operations.

The implementation of these taxes requires gambling companies to act as tax agents for large wins, withholding the 5% tax at the source. This mechanism is designed to simplify tax collection and ensure compliance. For smaller wins occurring throughout the year, the relevant authorities will calculate the net winnings, and the 5% tax will be applied when citizens submit their annual income declarations.

Babken Tunyan, Chairman of the Economic Affairs Committee, emphasised the importance of these measures in “ensuring that gambling profits contribute to the national economy without imposing excessive burdens on citizens.” He highlighted that the new tax structure is designed to be fair and transparent, providing “clarity and consistency in the taxation of gambling winnings”.

Further developments reported by 4H Agency, a strategic consultancy for CIS and Eastern European gambling markets, reveal that Parliament has introduced several other amendments to further regulate Armenia’s gambling industry. New directives include the establishment of a new sub-regulator to oversee certification procedures and monitoring, as well as the prohibition of offshore gambling.

Offshore gambling, defined as gambling organised in foreign countries and under the domain different from .AM domain, is now strictly prohibited from being advertised or being accessible within Armenia’s borders. This move aims to protect local gamblers and ensure that all gambling activities are conducted within the regulated framework of the country.

Sub-Regulator to be established

A significant addition to the new gambling regulations is the establishment of a sub-regulator. This new entity will play a crucial role in overseeing certification procedures, monitoring gambling activities, and providing a comprehensive market overview. The sub-regulator will be selected through a tender process, ensuring that the best-qualified entity is chosen to uphold the integrity of the Armenian gambling market.

The establishment of this sub-regulator mirrors certain features of Georgia’s regulatory model, where a “selected person” known as Random Systems ensures compliance of operator’s product with both international standards and local regulations.

According to Dmitry Hotsyn, Head of CIS Desk and Senior Consultant at 4H Agency, this new regulatory body will enhance the monitoring and enforcement of gambling laws, aligning Armenia with international practices. Hotsyn stated: “This move is expected to bring a higher level of oversight and professionalism to Armenia’s gambling industry.”

Tougher Monitoring

The introduction of a monitoring centre is another notable addition. This centre will serve as an online platform to monitor various aspects of gambling activities, including tokens, winnings, and real-time events. Every operator is mandated to connect their gambling content and equipment to this centre after certification and before use. This initiative reflects a pro-European approach to market development and aims to enhance transparency and accountability in the gambling industry.

Hotsyn highlighted the importance of this monitoring centre in ensuring real-time oversight and compliance, though he noted the challenges in implementing such a system effectively within the proposed timeline. “While the monitoring centre is a commendable step, its implementation within the short timeframe may pose significant challenges,” Hotsyn commented.

Amendments target Offshore Gambling:

Offshore gambling is now strictly prohibited from advertising or being accessible within Armenia’s borders. This move aims to protect local gamblers and ensure that all gambling activities are conducted within the regulated framework of the country.

4H Agency emphasised that this prohibition is crucial for maintaining the integrity of the local gambling market and preventing unregulated foreign entities from undermining domestic regulations. He added, “The prohibition of offshore gambling is a vital measure to safeguard the local market from unregulated and potentially harmful activities.”

4H Agency: Impacts and Alignment are yet to be seen

Hotsyn noted that these legislative amendments represent a significant step towards aligning Armenia’s gambling regulations with European standards. He emphasised that while the new regulations appear promising, their actual impact on the market remains to be seen.

The introduction of a monitoring centre and the new tax structures are innovative steps, but their effectiveness will depend on the practical implementation and compliance by the industry. “These legislative amendments show Armenia’s commitment to adopting international best practices, but their success will largely depend on the practicalities of implementation,” Hotsyn remarked.

Hotsyn also highlighted the potential challenges in implementing these new measures. For example, establishing a fully functional monitoring centre within the proposed timeline might be ambitious – “Considering the proposed timeline in the Armenian Draft for implementation, questions arise regarding how the regulator plans to implement such a system within a short timeframe and the precise measures current licensees will need to take to comply with it.”

However, the commitment to adopting international best practices is a positive sign for the future of Armenia’s gambling industry. Armenia aims to create a safer and more transparent environment for both gamblers and operators.

New measures, if implemented effectively, could position Armenia as a model for other countries in the region looking to regulate their gambling industries.

As Hotsyn noted: “A broad comparison between the Draft and the current Gambling Law reveals a substantial effort by the legislator to scrutinise and reform an industry that was previously only partially regulated, adopting a more European-style approach to regulation.”

“Local insights suggest that the Draft is likely to undergo further changes and amendments before its finalisation, potentially leading to a postponement of the implementation date. This expectation is reinforced by the significant disparities between the current available version, which has passed its initial reading, and the second proposed version, initially slated for release no earlier than January 2025 if adopted.”