European Gaming Lawyer magazine Autumn 2016 | Page 12

VAT treatment of gambling etc for
off-shore operators
by Dario Garcia

I

n this article we conduct a review of the
VAT treatment for gambling and the
revenue protection measures available
to Member States in the EU and in
particular the approach adopted by the
UK. We finish off with a short speculation on what
Brexit might mean (perhaps not that much).
EU Law
This is found primarily in Council Directive
2006/112/EC (the VAT Directive) and Regulation
282/2001/EU on VAT (“the VAT Regulation”).
Article 135.1(i) provides for the exemption of
“Betting, lotteries and other forms of gambling,
subject to the conditions and limitations laid down by
each Member State;”
The apparently very wide discretion allowed
to Member States to limit the scope of exemption
(limited only implicitly by the obligation on each
Member State to respect the general principles of
EU law, in particular prevention of distortion of
competition) coupled with the unlimited freedom
allowed Member States to impose other gaming and
gambling duties, makes the gambling sector possibly
the least harmonised of any in the EU.
Notwithstanding the close fraternal relationship
between EU Member States, each remains extremely
jealous of its own tax base. Each is keenly aware

12 | European Gaming Lawyer | Autumn Issue | 2016

of the threat posed to its tax base by cross border
shopping, within and outside the EU, particularly
in the digital age which in many sectors has made
this strikingly easy. One such sector is the online
gambling market.
EU law allows a surprising degree of national
protection in a supposedly single market, particularly
in the field of electronically supplied services. A
consideration of the nature and effect of these
protectionist measures, particularly as they affect the
gambling sector, is therefore necessary.
Place of supply: electronically supplied services
Article 2.1(c) of the Directive subjects to VAT:
“The supply of services for consideration within a
Member State…”
Where a supply takes place is therefore
fundamental in determining the proper VAT
jurisdiction. Not surprisingly, there are detailed rules
for determining this. We are focusing on gambling,
so it will be assumed that the consumer is a private
individual acting as such.
In such a case (business to consumer) or (“B2C”)
the basic rule respects the “origin” principle.
Accordingly Article 45 of the Directive provides:
“The place of supply of services to a non taxable
person shall be the place where the supplier has
established his business…”