Online Gambling in Spain: Legal Update

Published January 10, 2012 by OCR Editor

Online Gambling in Spain: Legal Update

Leading Spanish legal firm offers a close look at the Spanish Gambling Act.

On May 27, 2011, the Spanish Congress passed the new Spanish Gambling Act, which establishes the general principles of the regulatory framework applicable to gambling activities in Spain.

The Act covers gambling activities carried out in Spain, clarifying that it particularly focuses on online gambling activities (defined as gambling activities operated through electronic, computing, remote or interactive means).

The Act also applies to any "individual or company located outside the Spanish territory organizing or offering gambling activities to residents in Spain." This provision implies significant uncertainty about the scope of this new regulatory framework, as it would appear that operators accepting Spanish players (even those they did not actively "invite" to access the gambling activities) would be subject to the Act.

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On November 14, 2011, the Spanish Government approved two Royal Decrees developing the Spanish Gambling Act: one relating to licenses, authorizations and registries and the other one developing the technical requirements applicable to the gambling activities in Spain.

In addition, on November 16, the Spanish Council of Ministers issued the public tender for obtaining general authorizations to operate online gambling activities in Spain.

Therefore, from November 19, 2011 to December 14, 2011, the entities interested in operating in this field in Spain should file all the requested information and documentation for obtaining a general authorization.

Once the public tender is closed (December 14, 2011) operators will not be allowed to apply for the same type of authorizations for at least 18 months.

In this first round the following games will be authorized: fixed-odds sport bets, mutual (pool) sport bets, fixed-odds horse racing bets, mutual (pool) horse racing bets, poker, bingo, blackjack, roulette, contests, "other fixed-odds bets", baccarat, and "complementary/soft games" (an open category covering socially accepted games with a low risk of addiction, e.g., traditional Spanish card games).

Under the Act, general authorizations will have a 10-year term and their holders will be able to renew them for identical periods.

Once an operator has obtained a general authorization, it must also apply for individual authorizations necessary to run the different types of games it will offer under the gambling category for which it obtained a general authorization. For example, a company authorized to run betting activities in general must also obtain an individual authorization for mutual betting or fixed-odds betting.

The Act establishes a very tough sanctioning regime and, in this respect, very severe infringements could be sanctioned with fines amounting from €1 Million up to €50 Million.

Apart from economic sanctions, the Act contemplates the possibility for the National Gambling Commission to order to any financial entity to block a financial transaction that is connected with the operation/participation in unauthorized gambling activities.

Moreover, Internet-access providers could also be ordered by the said commission to block the access to a website which is connected with the operation of unauthorized gambling activities.

Tax Issues

The Act establishes a new tax, gaming tax, which arises when games, raffles, competitions, betting and other similar activities are authorized, organized or held with a state-scope.

The taxable base is calculated as follows depending on the type of gambling carried out; (a) the gross income (total amount received from gaming participation); (b) the net revenue (total amount received from gamingparticipation minus the total amount paid out to players as prizes; and (c)in the case of cross-betting or games in which taxpayers do not obtain as own income the amounts played, but just transfer money to winning players, the taxable base will be made up of the commissions.

The tax rate also depends on the type of gambling carried out, ranging from 20% to 25%, with a few exceptions.

In addition, the Act establishes an administrative fee for the game whose taxable event includes(i) application for the license, (ii) registration in the General Gambling Licensing Registry, and (iii) acts of the National Gambling Commission, etc. The tax rate depends on the type of taxable event, ranging from €20 to €10,000, except for acts of the National Gambling Commission, where the tax rate reaches 1/1000 of gross income (per year).

Although the gambling offered to Spanish players triggers a relevant tax burden under the Act, this tax is compatible with Spanish non-resident income tax. Thus, it is crucial to review the operational structure used to offer gaming in Spain, as factors such as the operator's jurisdiction or the existence of a permanent establishment in Spain are key when deciding whether the tax burden may be increased to 30%.

The information in this article is courtesy of Jorge Monclús and Xavier Xivillé of Cuatrecasas Goncalves Pereira.

For more, visit Online Casino Reports Spain .

See also

Worldwide Online Gambling Reulation Updates

Spain Closes Bitcoin Gambling Loopholes

Largest Spanish Event in iGaming

Celebrating Competition in a New Environment on Tap at Gaming in Spain 2019

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