Regarding taxation of business entities involved in the organization and gambling conduction

Law of Ukraine № 3325-IX "On amendments to the Tax Code of Ukraine regarding support of activities for protection of human life at sea according to international agreements of Ukraine" as of 10.08.2023 introduced separate clarifications regarding taxation of business entities in the organization and gambling conduction. Changes came into force on 03.09.2023.

Changes consist in bringing wording regarding activities of gambling business entities into compliance with the Law of Ukraine № 768-IX as of 14.07.2020 "On state regulation of activities regarding the organization and gambling conduction" (with changes) (hereinafter – Law № 768), which defines legal basis for implementation of state regulation of economic activity in organization and gambling conduction.

According to Part 1 of Article 1 Section I of the Law № 768, a game of chance is any game, condition of participation in which is the player's placing a bet, which gives right to receive winning (prize), probability of receiving and amount of which depends entirely or partially on chance, as well as on payer’s knowledges and skills.

According to Part 1 of Article 2 of the Law № 768 on the territory of Ukraine it is allowed to organize and conduct only the following types of activities in the organization and gambling conduction:

1) organization and gambling conduction in casino gambling establishments;

2) organization and conduction of casino gambling games on the Internet;

3) organization and conduction of bookmaking activities in the bookmaking points and on the Internet;

4) organization and gambling conduction in the slot machine halls;

5) organization and conduction of poker gambling games on the Internet.

Part 1 of Article 24 of the Law № 768 establishes that organization and gambling conduction on the Internet is carried out by the organizer of gambling games under the brand of organizer of gambling games on the basis of appropriate license according to requirements of this Law and legislation on gambling exclusively through the online systems of organizers of gambling that meet the requirements of this Law.

Paragraph 37 of Part 1 of Article 1 of Section I of the Law №768 stipulates that the organizer of gambling is a legal entity, resident of Ukraine, who, based on the obtained license, has a right to carry out the type of activity specified in such license for the organization and gambling conduction according to requirements of this Law.

Therefore, activities in the organization and gambling conduction can be carried out exclusively according to the obtained license.

Paragraph 134.1 Article 134 of the Tax Code of Ukraine (hereinafter – Code) stipulates that corporate income taxation object according to Paragraph141.5 Article 141 of this Code, in particular, is:

income of gambling organizers, received from activities in the organization and gambling conduction, except for income received from organizing and conducting gambling in the slot machine halls, reduced by the amount of payouts paid to the player;

income received from the organization and gambling conduction in the slot machine halls.

Provisions of Sub-paragraph 141.5.1 Paragraph 141.5 Article 141 of the Code establish that entities carrying out activities in the organization and gambling conduction are simultaneously subject to the income tax at rate specified in Paragraph 136.1 Article 136 of the Code, pay income tax at rates specified in Sub-paragraphs 136.4.1, 136.4.2 Paragraph 136.4 Article 136 of the Code.

Income tax accrued by entity involved in the organization and gambling conduction at rates, specified in Sub-paragraphs 136.4.1, 136.4.2 Paragraph 136.4 Article 136 of the Code, is not a difference and does not reduce financial result before taxation of such entity.

During conduction of activities in the organization and gambling conduction, at the same time as the income tax rate determined in Paragraph 136.1 of this Article, the income tax rate is set in the amount:

10 percent of income received from the organization and gambling conduction in the slot machine halls (Sub-paragraph 136.4.1 Paragraph 136.4 Article 136 of the Code);

18 percent of income received from activities in the organization and gambling conduction, except for income received from organizing and conducting gambling in the gaming halls, reduced by amount of payments made to the player (Sub-paragraph 136.4.2 Paragraph 136.4 Article 136 of the Code).

According to Paragraph 136.5 Article 136 of the Code, the income tax, defined as taxation object in Sub-paragraphs 134.1.2, 134.1.4, 134.1.5 of Paragraph 134.1 Article 134 of the Code, is a part of the income tax.

As follows, business entities that, on the basis of appropriate license, carry out economic activities in the organization and gambling conduction, in particular, organizing and conducting gambling on the Internet, are required to accrue corporate income tax according to Paragraph 141.5 Article 141 of the Code, taking into account provisions of Sub-paragraphs 136.4.1, 136.4.2 of Paragraph 136.4 Article 136 of the Code.

At the same time, income received from the organization and gambling conduction in the slot machine halls is taxed at the 10 percent rate according to Sub-paragraph 136.4.1 Paragraph 136.4 Article 136 of the Code, regardless of whether such hall is located in or outside the casino.