On 15 July 2022, Romania put into place Government Ordinances no. 15/2022 and no. 16/2022, which introduce different tax increases in the gambling sector affecting operators, related suppliers and gambling participants.
Introduction of a 5% advertising tax
Contracts for the promotion of trademarks, platforms, applications and gambling activities by placing advertising messages in the public domain (i.e., in cities or on public roads) or through television broadcasting are subject to a new advertising tax. Contracts, however, with sports entities or federations that provide for promotions in stadiums or gyms will not be subject to the advertising tax.
The advertising tax is 5% and will be applied to the value of the advertising contracts. This tax should be paid to the state budget before the 25th of the month following the one in which the advertising contract was concluded. In the case of contracts that provide for periodic payments to the provider, the obligation to pay the fee becomes due on the last day of the month in which the contractual instalment is due.
For the advertising tax, the gambling organiser must communicate the relevant contracts and any addendum modifying the value of the contract to the National Gambling Office within five working days from the date of conclusion.
The advertising tax will be due once the Romanian Tax Office issues the template for the relevant return to be used for declaring the tax as well as the payment details. The deadline set by GO 15/2022 is 18 August 2022 leading to an estimated first compliance date of 25 September 2022.
Increases in annual taxes, including for licensing and authorisation
Gambling and betting companies will also incur an increase in annual fees for licences and authorisation, the vice tax, administrative fees, etc. The tax increases cover both land-based and online activities.
Online operators will incur the following increases:
- Class I license holders (online gambling operators) will pay an annual licence tax ranging from EUR 15,600 (corresponding to an annual turnover of EUR 500,000) to EUR 312,000 (corresponding to an annual turnover of over EUR 10 million). The previous licence taxes ranged between EUR 6,000 and EUR 120,000 respectively.
- Class II license holders will pay an annual licence tax of EUR 9,500 instead of EUR 6,000. Importantly, the Class II category includes a wide variety of suppliers from the payment processor to software developers, affiliates, auditors, etc.
- The administrative taxes have increased to EUR 3,000 for analysing the licensing documentation and EUR 9,500 for issuance of the licence.
- The authorisation tax for Class I license holders has been increased to 23% of GGR from 16%. The new minimum cap is now EUR 120,000 instead of EUR 100,000.
The above tax increases apply from 18 July when GO 15/2022 entered into force.
Increases in the withholding tax on gambling winnings
In addition, due to GO 16/2022's amendments to the Romanian Tax Code, the tax on gambling income withheld by operators upon the cash-out of the players has been increased as follows:
- For income cashed-out up to RON 10,000 (EUR 2,020), the applicable tax rate is 3%.
- For income between RON 10,000 and RON 66,750 (EUR 2,020 and EUR 13,485), the applicable tax is RON 300 plus 20% for income in excess of RON 10,000.
- For income above RON 66,750, the applicable tax is RON 11,650 plus 40% for income in excess of RON 66,750.
Previously, the first two categories above were exempt from taxation.
The new gambling income tax rates will apply, starting with income cashed out and paid by operators to players, on 1 August 2022.
Split payment obligation for licence and authorisation taxes
Separate from the amendments brought by GO 15/2022 and GO 16/2022, there will be a payment split for both licence and authorisation taxes, resulting from the allocation of 1% of these taxes as a contribution to the Romanian Olympic and Sports Committee and 0.2% to the Romanian Paralympic Committee. (The remaining 98.8% will remain a gambling tax).
From a practical perspective, this amendment creates an additional administrative burden since a license holder must now perform three payments instead of only one.
Although these changes were published in mid-February, the Romanian Tax Office issued the new bank accounts for the split payment and the relevant tax return on 24 June (see Order 1150/2022). According to current information, the split payments should be performed starting 30 June 2022.
For more on how these changes might affect your Romania-based gaming business, contact CMS experts Cristina Popescu, Partner and Andrei Tercu, Tax Director.