Court supported position of tax authorities

Court supported the controlling authority’s position regarding legality of decision taken by the Commission for regulation of gambling and lotteries to take into account in further activities established facts of violations by the defendant of requirements of Paragraph 2 Part 1, Part 3 Article 15 and Part 1 Article 24 of the Law of Ukraine "On the state regulation of activities regarding organization and conduction of gambling".

Implementation by the tax authority of powers granted to it according to Sub-paragraph 20.1.4 Paragraph 20.1 Article 20 of the Tax Code of Ukraine directly concerns its appeal to the court regarding application of sanctions related to the prohibition of organization and conduction of gambling on the territory of Ukraine.

Part 1 Article 3 of the Law of Ukraine "On the state lotteries in Ukraine" № 5204-VI as of 06.09.2012 (hereinafter – Law № 5204-VI) defines that the state monopoly’s principle on the introduction of lotteries consists in the prohibition of introduction and holding on the territory of Ukraine of any lotteries, except for the state lotteries, which are conducted by the lottery operators who have received a right to conduct them, in manner specified by this Law. 

Part 2 Article 14 of the Law № 5204-VI stipulates that financial sanctions are applied to entities that organize or conduct on the territory of Ukraine games that meet the lottery’s definition, except when such game is conducted by a person who has received status of the state lottery operator, in the amount of sixteen thousand minimum salaries with confiscation of gaming equipment, and profit (income) from holding such game is subject to transfer to the State budget of Ukraine.

Taking into account above specified, the panel of judges believes that the key feature of the "lottery" is its payment. At the same time, as the court of first instance rightly emphasized, method of accepting money for participation in such game is not decisive for forming conclusion that game that was held is exactly the lottery.

According to the panel of judges, amount of a deposit of at least 400 UAH is actually equal to one lottery ticket, and it is this ticket that entitles participant of the draw (game) to receive a prize, and conditions of the draw do not provide that amount deposited is not a payment for participation in the draw.

It should also be taken into account that there are no signs of "freedom" of the defendant's holding of relevant draw, since in any case conditions of its holding provide for the participant to deposit money and receive the corresponding lottery ticket regardless of further movement of the indicated funds on the player's account.

Therefore, the fact that participant has paid for a right to participate in the draw is directly confirmed by the conditions of such draw, given that, it is concluded that the defendant conducted draw (game) that corresponds to the characteristics of the lottery, namely: 1) game conducted by the defendant was massive; 2) provided for a draft (winning) fund among its participants; 3) winning the game (raffle) was random; 4) territory of conducting (distributing) the game (raffle) extended beyond the boundaries of one building (structure); 5) had a payment nature, i.e. provided that the participants of raffle (game) would deposit money and receive the corresponding lottery ticket. In fact, the defendant sold property in the game (raffle) – "lottery tickets" for participant of the raffle (game) making a deposit in the monetary equivalent of 400 UAH for one lottery ticket, i.e., he conducted the lottery without obtaining appropriate license (which meets definition of the lottery without appropriate license, which is a basis for application of financial sanctions).

Violation committed by the defendant (conducting the game (raffle), which has characteristics of the lottery), corresponds to the composition of violation, which is defined in Part 2 Article 14 of the Law № 5204-VI and has as a consequence application of appropriate sanctions.

Therefore, the Sixth administrative court of appeal on 24.07.2024 in case № 320/4809/23 dismissed the defendant's appeal; decision of Kyiv district administrative court as of 19.01.2024 was left unchanged.