force , the explanatory memorandum has still not been issued .
To apply or not to apply ? The practical situation today The statements of the new Budget law were translated into legislation . Several sections of the VAT Act were amended accordingly . Article 44 § 3 , listing VAT exemptions , now states that are exempted from VAT ( i ) lotteries and ( ii ) other games of chance or games for money , except those provided by electronic means . The distinction between offline and online games , called for by Wallonia at the Conciliation Committee , has thereby been made .
As a matter of certainty , only online games and bets are now subject to VAT . Whether this also covers the National Lottery ’ s gaming and betting offer is a matter of interpretation . Indeed , not all products offered by the Belgian National Lottery should technically qualify as lotteries . Article 1 , § 14 of the VAT Act provides a new definition , from a tax point of view , of the terms “ games of chance , games for money and lotteries ”. Accordingly , lotteries exempted from VAT refer to operations requiring the purchase of lottery tickets . A narrow interpretation of the definition should therefore lead to rejecting the exemption for the National Lottery ’ s gaming and betting products .
One question remains : in the current context , should operators already start to collect VAT ? Strictly speaking , the answer is yes . The changes brought by the Budget Law have been translated into the VAT Act and the Minister only delayed their application until 1 August 2016 . However , no information has been given as to how the tax should be calculated .
It is worth mentioning that the concept underlying VAT is that this tax is supposed to be a neutral operation for the merchant or services provider as it should be borne by the end-customer . This core principle cannot be applied to an industry segment built not on purchases and services to consumers but on wins and losses by players . The European legislator himself seems to consider the gambling and betting industry to be maladjusted to the application of VAT . It would not make sense to charge an extra 21 % ( the Belgian standard VAT rate ) on all player deposits made .
To be on the safe side , operators would be well-advised to already start budgeting VAT , on top of the 11 % gaming tax on gross gaming revenue . For foreign providers , this may mean that they have to register to Belgian VAT , given that services provided by electronic means are taxed where their end-customer is located .
VAT on gaming in the cross fire of critics Although the application of the new VAT provisions is not yet certain , the measures have already attracted fierce critics from public authorities , regional governments as well as at private industry level .
Before the adoption of the new Budget Law , both the Council of State and the Audit Court had rendered a ( non-binding ) negative opinion against the Bill .
The Court of Auditors considers the revenues anticipated from the reform to be over-estimated and relying on a calculation which is in fact based on a mistaken ratio between online revenues and total revenue . The industry adds that it actually expects to be able to reduce the VAT burden by two thirds by deducting the VAT it currently pays for running its online business .
At a regional level , the government of Wallonia expressed its concerns that VAT on online gambling and betting will have an impact on the already struggling landbased sector because of the Belgian “ offline requirement ”, whereby online gambling licenses are tied to the bricks and mortar business . As a result , Wallonia fears that jobs could suffer , in a region where the private gaming sector has an important role to play .
On top of leading to double taxation for online operators , the VAT will impact the gambling tax revenues , which are a regional competence and source of income . The collection of federal VAT leads to a reduction of the tax base collected at regional level through the gaming tax .
Arguments can be made that the new VAT provisions affect the overall balance in the distribution of powers but also of public finances between the federal and regional government levels . Application of a federal VAT to gaming and betting , which are a regional matter , breaches the laws on attribution of competences and financing between the federal and regional powers . These laws contain the core principles of Belgium ’ s federal structure and Constitution . The reform may therefore also be considered to breach the principle of federal loyalty .
The Court of Auditors noted that the proposed measure is likely to be the subject of judicial proceedings and it is very likely that regional governments will file a claim for annulment before the Belgian Constitutional Court on these grounds .
Critics at a regional level are backed by the industry , which also advances arguments based on the violation of the principle of equal treatment . One of the
European Gaming Lawyer | Autumn Issue | 2016 | 9