Focus
CYPRUS - ONLINE
Between a rock and a hard place
The quasi-legal status of Cyprus’ online gaming market might cause confusion, but it’s also spawned a thriving industry sector
ONLINE GAMING LAW Although Cyprus is no longer an offshore jurisdiction in the strict sense of the word, its tax regime, location, network of double tax treaties, membership in the EU and stable economy, means the island is an ideal place to locate holding, trading and intermediary companies.
Its taxation regime doesn’t stand out particularly among its offshore competitors, but changes to tax legislation in 2002 gave Cyprus the lowest rate of corporate tax in the EU at 10 per cent, which applies to both onshore and offshore companies.
There are, of course, no physical casinos located in southern Cyprus, but gamblers exploited a legal loophole which resulted in online gambling via overseas providers going virtually unregulated. In 2004 a UK law firm began to work with the Cypriot government on a new Internet gambling legislative framework which was started when it was revealed the government was losing around €30m per year in revenue due to untaxed gaming activities.A bill was submitted to parliament in 2006 and rejected. A year later the government imposed stricter standards and two laws were amended - the Collective Bets (Regulation and Taxes) Law and Horseracing Bets and Lotteries Tax Law of 2007. These saw a reduced taxation on collective bets to 10
Online gambling in
Cyprus currently has an estimated
profit of €400m. By
turnover of around €2.5bn per year yielding a gross
2012 this turnover is expected to be as
high as €5bn with a gross profit of nearly €1bn.
per cent tax on net turnover and a focus on underage gambling. However it did not regulate online gaming.
Lawyer Olga Georgiades is Director of Lexact Solutions Ltd, a company formed for the purpose of providing practical seminars for professionals on legal and tax issues.
She said: “Since 2006 a number of draft bills have been prepared by the government and presented to the House of Representatives attempting to ban
G3 I MAY 2011 I PAGE 28
nearly all forms of online gambling in Cyprus. Until 2010 it has been unsuccessful in its efforts because the draft bills were blocked by the European Commission following a complaint filed by Magneta Technologies, a Cypriot gaming software developer.
“This complaint caused the European Commission’s interference due to the fact that the bill was considered to constitute a restriction on the freedom of establishment and the freedom to provide services.”
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