Deposit tax

Tuesday, 26 November 2019

By Lucian Barbu Tax Partner, Tax Advisory Services NNDKP And Mihai Șerbu Tax Manager, Tax Advisory Services NNDKP

Lucian Barbu

Mihai Șerbu

Mihai Șerbu

This article proposes to address the new gambling tax introduced by the Ordinance 114/2018, effective as of January 1, 2019, colloquially referred to as the “Ordinance on greed”, whereby online gambling operators have the obligation to pay a monthly fee representing 2% of the total collected monthly participation fees. At the time it was introduced, this new tax caused a lot of controversy, as it was not clear what exactly would be included in the taxable base, more specifically, whether the taxable element was the players’ deposits or the entire amounts gambled by the participants.

Shortly after the Ordinance came into force, norms where published for the application of GEO 114/2018, which clarified that this tax applies to deposits made by players and not on all the stakes placed by the players on each game of chance.

Since then, some of the online gambling organizers have contemplated “transferring” this tax to the players, by withholding this amount when a new deposit is made by the players, on the organizers’ gaming platform. Against this background, we present below some discussion points that we believe should be taken into consideration from a tax perspective when analysing the implementation of such a decision:

1. Should the fee withheld from players be included in the GGR of the online gambling operator?

At first glance it may be argued that this amount should not be included in the GGR, based on the reasoning that the amount withheld from players (as deposit tax) cannot be actually used when participating in games of chance. However, upon a thorough reading of the definition of “participation fee”, such interpretation may change. Thus, according to Emergency Ordinance 77/2009 on gambling,


“Direct participation fee means the amount of money received directly from the participant by the organizer in exchange for the right to participate in the game” and

“Dissimulated participation fee means any amount collected or requested in addition to the value received from the same person by the same economic operator for the sale of goods or products or for performing similar or identical services, whether it is received or requested directly by to the organizer of the activity or by another person who participates in any form in the conduct of the activity, with the purpose of allowing the right to participate in gambling.”

As such, given the extremely comprehensive definition of the dissimulated participation fee found in the main gambling legislation, it seems difficult to combat the interpretation according to which the amount withheld from the players in order to pay the deposit tax due by the online gambling organizers would be qualified as participation fee. Thus, for the purpose of calculating  the authorization fee, these amounts should be included in the GGR.


From a practical perspective, the interpretation of the authority would most likely be in the sense of including these amounts in the GGR.

  1. In case of non-resident gambling organizers, does the amount withheld from players as tax on deposits, from a fiscal point of view, represent an income subject to tax on non-resident income?


The Fiscal Code provides that the payment made to a non-resident person for a service rendered in Romania is subject to withholding tax. In the absence of an explicit definition for the term “service”, one interpretation could be that the amount withheld by the organizer from the player represents in fact the equivalent of the service whereby the player is granted the right of access on the operator’s gaming platform. The question that further remains to be answered is whether this service is provided in Romania.


The tax legislation is not explicit about what would qualify as a service provided in Romania, considering that it is not entirely clear whether a service that is provided by a non-resident on a gaming platform from abroad but is authorized to operate in Romania may be treated as a service rendered in Romania.


Thus, although unclear, there are certain indications reflected in the Explanatory memorandum for the approval of the Fiscal Code of 2015 (when a differentiation between the taxation of the services provided in Romania and that of other services was established). This document  details that the amendment of the fiscal treatment appeared as a result of some difficulties encountered in practice in performing contracts with non-resident persons (in particular) who provide marketing services, suppliers for which the procedure for contacting and obtaining certificates of fiscal residence with the view of not taxing such incomes in Romania was burdensome. Thus, the Romanian beneficiaries of services were often put in the situation to bear the tax owed by non-residents.


Considering the above, given that the aforementioned tax legislation seems to treat only revenues obtained as a result of the provision of services through a physical presence in Romania as taxable, a reasonable interpretation would be to consider that revenues obtained by non-resident online gambling organizers (by withholding the tax on deposits) from players (Romanian residents) would not represent taxable income in Romania, according to the provisions related to the tax due for revenues obtained by non-residents.


In conclusion, before implementing a decision such as the one analyzed above, all relevant legal aspects, including those arising from the tax legislation, must be considered in order to obtain a more accurate picture of its potential impact.

Author: Editor

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