Theoretical and practical aspects regarding the taxes owed by slot machine gambling operators, in Romania, as per the specific gambling legislation 656o3t

by Mihai Șerbu, Senior Tax Manager Nestor Nestor Diculescu Kingston Petersen 64j4c

In Romania, the gambling activity is taxable under general conditions based on the Fiscal Code[2].

Below we will try to provide a brief description of the tax burden specific to the gambling industry due by slot-machine gambling operators, as well as the technical or istrative difficulties that may arise in practice.

Theoretical aspects of the tax burden specific to the gambling industry due to slot-machine gambling operators

According to art. 13 of GEO 77/2009, the granting of the gambling organization license, respectively the granting of the gambling operation authorization is made with the collection of taxes, the amount of which is established, in euro equivalent, according to the Annex which is an integral part of GEO 77/2009.

Note: The exchange rate used for the conversion of taxes established in euro equivalent is, according to GEO 77/2009, the one published on the first working day of October of the previous year, in the Official Journal of the European Union (e.g. for 2022, the exchange rate exchange rate used is 1 euro = 4.9470 lei).

taxes owed by slot machine gambling operators

Thus, according to the gambling legislation, slot machine operators owe the following taxes:

1. The license tax related to gambling organization is set at a fixed amount, representing the RON equivalent of EUR 20,000, and is paid as follows:
2. for the first year of activity, until the 25th of the month following the one in which the license application was approved;
3. for the following years of activity, 10 days before the expiration of the previous licensing year.

2. The annual tax for the authorization to operate gambling (Authorisation tax) is set, in a fixed amount, according to the type of slot machine authorized (slot-machine class A – EUR 3,600/year or electronic devices allocating limited risk winnings class B, EUR 1,500 /year), and is paid as follows:

1. for the first quarter – up to and including the 25th of the month following the one in which the documentation was approved – for the current quarter;
2. for the other quarters – up to and including the 25th of the last month of the quarter, for the following quarter.

3. The Vice tax related to slot machines is set in a fixed amount of EUR 400/authorized machine/year, which is paid by the organizer together with the authorization fee, respectively until the 25th of the last month of each quarter.

4. The annual contribution for the financing of an activity established under the National Gambling Office (“NGO”), for the promotion of the observance of the principles and measures regarding socially responsible gambling is established in a fixed amount of 1,000 euro / year.

The License tax, the Authorization tax and the Vice tax represent “fiscal receivables”, according to the notion defined by the Fiscal Procedure Code, and are declared to the fiscal authorities via form 100 – “Declaration regarding the payment obligations to the state budget”, until the payment term provided by law.

Practical aspects regarding the fees due by slot-machine gambling operators

• Regarding the payment term of the Annual Contribution, from a legal point of view, there are contradictory legal provisions in Order no. 400/2019 compared to the main and hierarchically superior normative act GEO no. 77/2009. By way of example, if GEO no. 77/2009 stipulates that the deadline for payment of these contributions is “December 15 of each year, and the deadline for operators who have obtained a license after this date must be at the time of obtaining the license”, Order 400/2019 stipulates that, starting with 2020, the Annual contributions will be paid at the same time “with the payment at the legal maturity of the license fee corresponding to the next license year, respectively at least 10 days before the expiration of the previous license year”. From a practical point of view, the payment term observed by the operators and the ONJN is the one provided in Order 400/2019, although the later could not be in contradiction or add to the hierarchically superior normative act.

• Regarding the Vice tax, according to the law, such tax is paid by the organizer together with the Authorization tax. However, from a practical point of view, although they are paid within the same deadline, the two taxes are paid for different quarters, i.e. the Authorization tax is paid in advance for the slot machines authorized in the following quarter, while the Vice tax is paid for the slot machines operated in the quarter for which the payment is performed. Also, if the operator has an authorized slot machine which was not operated in any of the days of a month within the quarter (e.g. it was withdrawn in storage), from a practical point of view, the gambling organizer does not pay the Vice tax for thus slot machine, for the month/s in which it was not operated.

• Regarding the Authorization tax:

1. As described above, the Authorization tax due for the first quarter must be paid by the 25th of the month following the one in which the documentation was approved, for the current quarter. Thus, to the extent that the payment of the authorization tax was made during the quarter, the gambling organizer has the obligation to pay in advance the fee due for the entire quarter, even if he will operate those slot machines only for a fraction of quarter (only in one or two months of the quarter paid in full).

In this situation, even if not specified in the law, from a practical perspective, the gambling organizer may “regularize” the amounts paid in advance, for the period (month/s) during the first quarter of authorization, in which the authorized slot machines were not operated, at the end of the authorization year(practically having the authorization and being able to operate the slot machines in the last quarter of the authorization, with the payment of the authorization fee made a year ago).

1. In the context of the pandemic, the legislator granted certain fiscal aids to the organizers of traditional gambling through the Emergency Ordinance 48/2020, the Emergency Ordinance 55/2020 and the Emergency Ordinance 106/2020, one of the most important being related to the exemption of payment of the Authorisation related taxes during the state of emergency/alert, when the activity carried out by the traditional gambling organizers was suspended.

Although, without a doubt, the aid received was like a breath of fresh air for traditional gambling organizers, in the context in which the pandemic greatly affected their activity, nevertheless, at a more detailed look, the implementation of the exemption for the authorization tax proved to be a very difficult task, given that the authorization tax is normally computed and paid on a quarterly basis, and the tax exemptions could be applied on a daily level.

Thus, the manner in which the gambling operators declared and paid the Authorisation taxes within in the period 2020 – 2021, in the absence of detailed application provisions, took into in particular the practical expectation of the regulatory authority and at the same time the taxpayer’s own best judgment.

Conclusions

Like many other highly regulated areas, the gambling industry has many peculiarities (not only technical, but also inherent in the industry), which sometimes need a practical complement in order to achieve a good understanding of the correct way to comply with the legal requirements. However, most of the “istrative difficulties” identified in the tax issues provided for in the gambling legislation, especially for slot machine operators, arise as a result of the establishment of authorization tax / vice tax in a fixed amount and not as a percentage of the “operator’s profit”, as it is applicable in the case of fixed-odd betting gambling activities, or remote gambling activities.

Thus, one idea for reducing istrative distortions and streamlining the taxation of income from the authorization of slot machines could be the transformation of the fixed amount tax model into a model for taxing the gambling “operating profit”.

NOTES:

[1] Law 227/2015 regarding the Fiscal Code as amended and completed

[2] Government emergency ordinance 77/2009 regarding the organization and operation of gambling as amended and completed

Note 3: For slot-machines according to art. 10 para. (1) letter. e) point (i): “if the events are organized in the physical presence of the participants by means of specific machines, equipment and installations, which will be operated in specialized locations where gambling activities can take place and the winnings are unlimited; and it depends on chance”

Note 4: Law 207/2015 regarding the Fiscal Procedure Code, with subsequent amendments and completions