The challenges that the new tax reform puts before the whole industry
Casino Life Magazine Exclusive Legislation Update Georgia
Georgia was, and still is a regional leader when it comes to the regulation and significance of the gambling industry for the national economy. Such status is demonstrated not just by the formal organization and proactive approach of the industry’s stakeholders (e.g., the formation of the Georgian Gambling Association) in the territory but also by the formidable activity of the government in respect to the same. The government has implemented may good practices and solutions when it comes to AML procedures, protection of minors, etc. destination for many foreign nationals visiting the country and its sites.
This approach was somewhat revised in the past few years, since after the pandemic the government took a stricter line towards the industry and its rapid development. This became clear from the changes to the legislative framework which began in 2021. Through these A) the minimum age for gambling was increased for country’s nationals (to 25) while it was reduced for tourists (from 21 to 18); B) a gambling ban for certain groups of individuals was introduced (e.g. government officials, recipients of state aid etc.); C) taxes and fees for online gambling sector were increased for more than 70 percent; and D) TV advertising was almost banned entirely.
Even though the intention behind these changes was positive, and the government had the aim to further regulate the industry in order to provide a higher degree of security for all stakeholders, such changes set a different tone for the whole sector. Namely, in 2023, Mr. Gharibashvili, Georgia’s prime minister, further announced that the rate imposed on gross gaming revenue (GGR) would increase from 10 percent to 15 percent. He also introduced a player-winnings tax on withdrawals, escalating from two percent to five percent for gaming operators.
Furthermore, it was announced that changes in legislation will allow land-based casinos to operate online casinos and allowed interested companies to obtain licenses specifically for online casinos. A brick-and-mortar presence was no longer a prerequisite for the licensing of online operators. However, these changes come with a twist since the government is simultaneously imposing a new, 1.6 million EUR annual fee for each such license holder. In addition to this, municipal governments also decided to increase the tax pressure on the operators by increasing fees per gaming table or machine (the latest increase being done by the city of Batumi).
Needless to say, Georgia – as most of other countries in the world – is combating illegal operators and their influence, and has only recently put more resources into this fight. At the same time, its government is increasing the burden on licensed and regulated operators in parallel, making it even harder for them to do business in the territory, especially for those who have made significant investments into their physical presence in the country (hotels and resorts).
As expected, the announced changes sparked a large debate and concern in market, and have caused the main operators to review their business case, since the tax burden is increased both for them and their players. This could create a shift in country’s attractiveness as a “cool” vacation and gambling destination.
DISCLAIMER: Law Firm Anđelović, Siketić & Tomić d.o.o. wish to avoid inaccuracies and, whilst every precaution has been taken to ensure that information contained in this report is accurate, no liability is accepted for errors or omissions, however caused.
