Andrey Astapov, ETERNA LAW: Ukraine faces critical choices as gambling finish line nears

Following the formal ascension of Bill-2285D by President Volodymyr Zelensky, Ukraine enters a critical four months to finalise its legislative gambling frameworks, as the country seeks to launch its regulated marketplace in 2021, ending a decade of gambling prohibition. 

Observing on-the-ground developments, Andrey Astapov, Managing Partner of Kyiv-based law firm ETERNA LAW, writes for SBC News about the critical final provisions that must be accommodated as Ukraine gambling enters its make-or-break period…

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On 14 July 2020, the Verkhovna Rada of Ukraine legalised gambling. Quite a historical event for a country where gambling had been prohibited for almost a decade. 

The incentive for legalisation is simple as, despite the official prohibition, the gambling market never ceased to function, and its turnover in the shadows is told by some unofficial statistics to reach almost $1 billion per year. 

Experts promise that once the market begins to function, the number will only continue to increase. In the meantime, foreign investors keep a close eye on the reopening of the market and see Ukraine as their next destination point. 

Let us consider the central provisions of the recently adopted legal framework for gambling in Ukraine and highlight a range of advantages that the law offers for investors. 

Legalised gambling: The list of allowed land-based and online products

A wide range of gambling products has been legalised by the Gambling Law, including casinos (both online and land-based), betting (online and at betting points), gaming machine venues and online poker. 

Land-based gambling activities can be located only in hotels, which correspond to certain requirements in relation to the location of the premises and quality of services, specifically:

  • In Kyiv, casinos shall be located only in five-star hotels with 150 rooms. For other cities, in four / five-star hotels with at least 100 rooms. 
  • Gaming machine venues are to be located only inside three / four / five-star hotels.
  • Betting is allowed only at betting points, which can be created inside three / four / five-star hotels with at least 25 rooms. 

Online gambling (i.e. online casinos, online poker, and online betting) shall also follow special provisions prescribed by the law. Each organiser shall be connected to an online monitoring system and have a website with the .UA.domain. 

Lastly, there is also a licence for B2B gambling services, under which organisers may develop and provide software for other gambling operators, both residents and those based outside of Ukraine. 

Ukraine’s tempting offer to investors

Ukraine is open to foreign investments not just by words. It stimulates the flow of cash from abroad by a range of legislative incentives, and the principle is also applied in the gambling framework. For those organisers who are ready to build a new hotel in accordance with the requirements to the size and quality, the Gambling Law introduces an investment licence – which is free of charge and valid for 10 years. 

As to the specific conditions, it is required to either (i) build a new five-star hotel with 150 rooms for Kyiv and 100 rooms for other cities or (ii) implement another project agreed by the Cabinet of Ministers of Ukraine. An operator will be exempt from payment for a casino licence and shall only pay for each roulette table, card table, and gaming machine as per regular fees.

Fees for licences and gambling taxation in Ukraine

Each gambling activity mentioned above requires a separate licence. Licences are all valid for five years but the fees are to be paid each year and constitute the following:

  • For casinos, $2,000,000 annually in Kyiv and $1,000,000 annually in other populated areas;
  • For gaming machines, $250,000 annually for 250 gaming machines; 
  • $1,000,000 annually for betting;
  • $230,000 and $170,000 annually for online casino and online poker respectively;
  • a B2B licence costs $50,000 for five years; 

However, until the introduction of the State Online Monitoring System that is required not later than in two years after the enforcement of the Gambling Law, all licence fees are to be tripled. 

As to taxation, following the examples of other countries, Ukraine decided to adopt the GGR rates as the most appropriate system for the gambling industry. The Draft Law on the Amendments to the Tax Code of Ukraine is already under consideration in the Verkhovna Rada of Ukraine and offers such rates: 5% for betting, 12.5% for slot machines, 10% for online casinos, online poker and lotteries. 

Who is responsible for controlling excessive gambling? 

Prevention of excessive gambling will be the obligation of each gambling organiser. For that, the law prescribes certain rules. For example, there will be created the Register of Individuals with Restricted Access to Gambling, data to which may be submitted either by an individual himself/herself or by family members. 

Some also fear the ubiquity of gambling advertising. As a response, the law prescribes certain restrictions to land-based advertising and prohibits to direct it in relation to vulnerable categories of the population and children.

Conclusion

Ukraine is heading to the finish line in its struggles to legalise gambling. Favourable conditions for investors, extra revenues for the budget, and big potential of the market – the Gambling Law promises a lot. 

Still, a few small steps are necessary: the creation of the Authorised Body that will issue the licences and supervise the market, the adoption of relevant tax amendments, and the specification of some gambling procedures in a range of bylaws. 

When all is achieved, the Ukrainian market will finally get ready “to gamble and win”.

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