By Harrison Dell, Director, and Alex Papafotiou, Special Counsel.
In the digital age, the online casino industry has emerged as a robust and lucrative sector. The allure of setting up an online casino business lies in its flexibility, global reach, and resilience to factors that traditionally impact brick-and-mortar establishments.
However, the choice of jurisdiction for setting up such a venture, legal and tax issues, and even choice of gaming provider is pivotal. Different countries offer varying benefits, regulatory environments, and tax incentives, making the decision a critical strategic move. This article delves into some of the most suitable jurisdictions for establishing an online casino and more.
While setting up can be done with the right advice, attracting players is a business strategy and often the difference between success and failure.
Selecting an iGaming Provider
In the world of online casinos, selecting the right iGaming provider is a pivotal decision that can significantly impact the success and sustainability of your business. An iGaming provider is essentially the backbone of your casino, offering the software that powers your games, the user interface, and often the administrative tools needed to run the casino. Below are key considerations to keep in mind when choosing an iGaming provider.
Range and Quality of Games
The heart of any online casino is its game portfolio. Players are attracted to casinos that offer a wide variety of high-quality games. When evaluating iGaming providers, assess the range of games they offer, including slots, table games, live dealer games, and others. It’s not just about quantity; the quality of these games is equally important. High-definition graphics, engaging soundtracks, and seamless gameplay are crucial factors that enhance the gaming experience.
Moreover, look for providers that frequently update their game portfolio and introduce innovative features. This ensures your casino remains fresh and appealing to players.
Licensing and Compliance
An essential aspect of any iGaming provider is their commitment to licensing and regulatory compliance. Choose a provider that is licensed by reputable gaming authorities. This not only adds credibility to your casino but also ensures that the games are fair and operate under the guidelines of gambling regulations.
Compliance is particularly important in jurisdictions with stringent gambling laws. The provider should adhere to all legal requirements, including responsible gaming practices and anti-money laundering protocols.
One of the most important aspects of a gaming platform is ensuring that its software runs on a fair and transparent basis. Choosing compliant and well-established iGaming providers gives users the confidence that is required to trust the platform.
Technology and Integration
The technological foundation provided by the iGaming provider is critical. Look for a provider that offers a platform with robust performance, high uptime, and seamless integration capabilities. The platform should be able to handle high volumes of simultaneous players and transactions without performance issues.
Integration capabilities are also crucial. The provider should offer APIs that allow easy integration of various payment systems, affiliate management tools, and customer relationship management (CRM) systems. The easier it is to integrate these systems, the smoother your casino operations will be.
Support and Services
A reliable iGaming provider should offer excellent customer support and services. This includes technical support, marketing assistance, and help with compliance issues. A provider that offers 24/7 support is preferable, especially if your casino operates in multiple time zones.
Additionally, consider providers that offer services like marketing tools, data analytics, and customer engagement strategies. These services can significantly enhance your marketing efforts and help you better understand your player base.
Cost and Revenue Share
Finally, consider the cost of partnering with the iGaming provider. Providers typically charge a setup fee and a monthly fee based on a revenue share model and Gross Gaming Revenue (GGR). Understand the fee structure and ensure it aligns with your business model and profitability projections.
Selecting the right iGaming provider is a multifaceted decision involving the evaluation of game quality, licensing and compliance, technology, support services, and cost. The right provider will not only offer a robust and compliant gaming platform but also support your business growth with additional services and reliable support.
Example iGaming Providers
Below is a list of top iGaming service providers and platforms. Some are full-service, others provide sportsbooks only, and some even offer custom products.
- Softswiss: Notable for online casino platforms and crypto casino solutions, including game aggregation and licensing support. One of the largest providers.
- Playtech: Industry giant with a vast array of products including casino games, live dealer games, and sports betting platforms.
- Bit8: Offers advanced gaming platforms with AI integration and sophisticated backend tools.
- Ultraplay: Specializes in eSports betting as well as traditional casino and sports betting offerings.
- SoftGamings: Recognized for casino platform solutions, game aggregation, licensing, and banking solutions.
- Sportingtech: Combines sports betting with gaming technology, offering platforms for sportsbook, casino games, and lottery.
This list should not be taken as an endorsement or recommendation, choosing a provider is a business decision, there are many more than listed here.
Licensing and Jurisdictional Considerations
Choosing the right jurisdiction is a pivotal decision for setting up an online casino. Curacao, for example, is favored for its straightforward licensing process and favorable tax regime, making it a popular choice for various online casino models, including white label casinos. However, the specific requirements and benefits of each jurisdiction vary, underlining the importance of aligning your choice with your business model and target market.
We list and detail some of the most common jurisdictions for online casinos below. There are plenty of other jurisdictions offer gaming licenses with carrying cost and ability to operate internationally. You should seek advice before choosing any gaming license.
1. Curacao
Curacao stands out as a premier destination for establishing an online casino business. Known for its straightforward licensing process, Curacao has attracted hundreds of companies, particularly after the introduction of the Compliance Ordinance on Games of Chance in September 2023, which refined the regulatory landscape.
The island’s economy is significantly bolstered by the iGaming industry, legalized since 1996. Nearly three decades of experience have made Curacao adept at offering a streamlined, cost-effective licensing process The Curacao Gaming Control Board and the newly formed Curacao Gaming Authority oversee the sector, emphasizing anti-money laundering measures and responsible gaming.
Obtaining a license in Curacao is not just about compliance; it’s about establishing credibility in the global gaming market. The licensing process is efficient, with authorities typically issuing licenses within weeks. Notably, a single license covers all gaming activities, which is a boon for businesses looking to expand their offerings. Additionally, the tax structure is favourable, with companies paying no corporate income tax and only 2% on net gains.
Previously, Curacao offered master and sub-licenses, but post-2023 reforms have streamlined this to a single license type, issued directly by the government. This change ensures a more centralized and transparent licensing process.
However, Curacao’s liberal approach doesn’t mean a compromise on standards. Companies must adhere to Customer Due Diligence, implement Know Your Customer solutions, and identify Ultimate Beneficial Owners. The Curaçao National Ordinance on Games of Chance, revised in 2023, underscores the commitment to preventing criminal activities, protecting participants, and combating gambling addiction.
The application requires various documents, including proof of domain ownership and software details. The entire process is streamlined for efficiency, typically concluding within six weeks. This mix of regulatory rigor, economic incentives, and a straightforward licensing process makes Curacao a top choice for online casino businesses.
2. Malta
Malta is a gateway to the European online gaming market. As a member of the European Union, it offers strategic access to European customers. Malta’s gaming authority, the Malta Gaming Authority (MGA), is renowned for its stringent yet business-friendly regulations. The MGA ensures that operators adhere to high standards of fairness, player protection, and anti-money laundering practices.
The application process in Malta, while thorough, is designed to be transparent and fair. Operators can choose from various types of licenses, depending on their specific business needs, such as B2C and B2B licenses. The cost of these licenses varies, but the initial application fee is generally around €2,700, with annual fees dependent on the type of license and revenue generated.
One of the unique aspects of Malta’s regulatory framework is its focus on player protection. The MGA mandates operators to implement responsible gaming measures, including player self-exclusion options and limits on deposits and losses. This emphasis on social responsibility not only protects players but also enhances the reputation of businesses operating under a Maltese license.
In terms of taxation, Malta offers a competitive structure. The tax rates are dependent on the type of gaming service provided and the revenue generated. However, compared to other jurisdictions, Malta’s tax rates are considered reasonable, making it an attractive option for many operators.
Furthermore, Malta’s robust IT infrastructure and skilled workforce make it an ideal location for technology-driven gaming businesses. The country has a thriving iGaming ecosystem, with numerous service providers, gaming software developers, and payment processors, offering a supportive environment for new entrants.
3. Cyprus
Cyprus presents a unique case in the realm of online gaming. The country has a somewhat restrictive stance on domestic gambling but offers favourable conditions for online gaming companies targeting international markets. This dual approach allows Cyprus to maintain control over gambling within its borders while benefiting from the economic advantages of hosting online gaming companies.
The licensing process in Cyprus involves stringent background checks and financial assessments. Operators must pay a licensing fee of €30,000 for a one-year license or €40,000 for a two-year license. Additionally, maintaining a Cyprus bank account is mandatory to ensure the security of bets placed on the platform.
Cyprus’s regulatory framework is focused on ensuring the integrity and transparency of online gaming operations. The Cyprus Gaming and Casino Supervision Commission, responsible for regulation, emphasizes compliance with international standards, particularly in the areas of player protection and anti-money laundering.
The tax environment in Cyprus is also favorable for online gaming companies. While specific tax rates may vary, the overall tax burden is lower compared to many other European jurisdictions. This, combined with the country’s strategic location and well-developed infrastructure, makes Cyprus an appealing choice for operators looking to establish a presence in the Mediterranean region.
4. Unregulated Jurisdictions
There are some jurisdictions that currently do not have in place a regulatory regime for online gambling businesses. These jurisdictions, although they are cheaper to establish an online casino, are considered higher risk jurisdictions due to the lack of regulatory clarity. Examples are Saint Vincent & the Grenadines (SVG), Costa Rica and Belize.
In essence, casino owners in these jurisdictions take a gamble (no pun intended) as to how that country will regulate their business in the future. Unregulated casinos always face the danger of being subject to onerous compliance requirements if and when regulations change. However, less risk-averse businesses choose to set up their online gambling business in an unregulated jurisdiction in order to prove their concept and generate some income before they take the next step to register and obtain a license in a more reputable jurisdiction.
White Label Casinos, Game Aggregators, Sportsbooks, and Crypto Casinos
In the rapidly expanding world of online casinos, navigating the legal landscape is as crucial as the technological infrastructure. The type of online casino operation you choose significantly influences the legal framework you must adhere to. Let’s explore these aspects in detail.
A white label casino offers a comprehensive, ready-to-use platform, allowing operators to focus on marketing and customer engagement rather than the technical and backend operations. This model requires thorough due diligence to ensure that the platform complies with the licensing requirements and gambling regulations of the chosen jurisdiction.
Game aggregators are another popular model, which consolidates a variety of gaming content onto a single platform. This approach demands careful consideration of licensing, especially ensuring that all games meet the regulatory standards of your operating jurisdiction. This is usually handled by your licensee.
Sportsbooks, which focus on sports betting, entail additional legal considerations, particularly due to the diverse nature of sports betting laws across different countries. Licensing for a sportsbook often involves demonstrating robust measures for fair play and responsible gambling.
Crypto casinos, combining traditional online gambling with the use of cryptocurrencies, introduce additional layers of complexity. The regulatory stance on the use of cryptocurrencies in gambling varies globally, adding to the challenge of ensuring regulatory compliance.
Legal Structure
The legal structure of your online casino business is a foundational aspect. Typically, establishing a legal entity in the licensed jurisdiction is sufficient. However, operations might span multiple countries, and it’s sometimes feasible to have non-customer facing services based in countries like Australia. The key is to ensure that your legal structure is in compliance with international gambling laws and caters to your business needs.
Shareholders must also have regard to their local law, especially tax laws, when owning an online casino business. You need global legal counsel to assist you to find the right structure. It is a balance of legal and tax issues.
Affiliate Marketing and Legal Compliance
Using affiliates to promote your online casino introduces another layer of complexity, especially in jurisdictions with stringent gambling restrictions, like Australia. It’s imperative to ensure that your affiliates operate within legal boundaries to avoid falling afoul of regulatory stipulations.
In conclusion, establishing an online casino business requires a thorough understanding of the legal, regulatory, and operational dimensions. From selecting the right jurisdiction and business model to ensuring compliance with international gambling laws and tax regulations, each step is crucial in building a successful and legally sound online gaming enterprise.
Tax Issues in Setting up an Online Casino Business
Navigating the complex world of tax regulations is a crucial aspect of establishing and operating an online casino. Understanding and complying with these tax rules can significantly impact the financial health and legal standing of your business. This section delves into key tax issues: Corporate Tax Residency, Controlled Foreign Corporation (CFC) Rules, Transfer Pricing, and Local Tax Issues.
Corporate Tax Residency
Corporate Tax Residency determines which country has the right to tax a company’s profits. This is a critical factor for online casinos, which often operate across multiple jurisdictions. The rules for corporate tax residency vary by country but generally hinge on where the company is managed and controlled or where it is incorporated.
For instance, a company managed from the UK but incorporated in Malta may still be considered a UK tax resident under certain conditions. This could subject the company to UK corporate tax rates, which could be significantly higher than those in Malta. Therefore, it’s essential for online casino operators to understand the tax residency rules of each country they operate in and structure their operations accordingly to optimize tax efficiency.
Understanding corporate tax residency is essential in strategic planning, especially when considering the implications of double taxation treaties and domestic tax laws. Careful structuring and planning can help mitigate tax liabilities and enhance profitability.
Controlled Foreign Company Rules
Controlled Foreign Corporation (CFC) rules are designed to combat tax avoidance through the use of offshore companies. In Australia, for instance, the CFC rules can attribute the income of a foreign subsidiary to an Australian parent company, thus subjecting it to Australian tax rates. Read more about Australian CFC rules here.
While these rules are known as Subpart F in the USA, they exist under different names in other countries. The essence of CFC legislation is to discourage businesses from shifting profits to low-tax jurisdictions. For online casinos, which often have complex international structures, understanding and navigating CFC rules is crucial. Non-compliance can lead to hefty penalties and a significant increase in the overall tax burden.
It’s important for casino operators to assess the impact of CFC legislation on their business and engage in proper tax planning to ensure compliance and optimize tax efficiency. This might include restructuring business operations or re-evaluating the jurisdictions in which they are based.
Transfer Pricing
Transfer pricing concerns the prices charged in transactions between companies within the same corporate group, particularly when they are based in different countries. This becomes a significant issue for online casinos with a multinational presence. Tax authorities scrutinize these inter-company transactions to ensure they are conducted at arm’s length – that is, the terms and prices are similar to what would be expected between independent entities.
Effective transfer pricing compliance involves setting, analysing, documenting, and adjusting the prices of these transactions to meet the requirements of the tax jurisdictions involved. Failure to comply with transfer pricing rules can result in substantial penalties, including double taxation and adjustments to taxable income.
For online casinos, transfer pricing issues often arise in the allocation of expenses and revenues between different entities, such as licensing fees, software development costs, and management service fees. Establishing robust transfer pricing policies and maintaining comprehensive documentation is crucial for compliance and avoiding tax disputes.
Local Tax Issues
Local tax issues vary significantly depending on the country in which the online casino operates. These can include corporate income taxes, Value Added Tax (VAT) or sales taxes, withholding taxes on payments to foreign entities, and more. Understanding the specific tax obligations in each jurisdiction is vital for legal and financial compliance.
For instance, in some countries, gambling winnings are taxed at the player level, while in others, the operator is responsible for paying taxes on their gross gaming revenue. Additionally, the tax treatment of promotional offers, bonuses, and player winnings can vary, impacting the overall tax liability of the casino.
Operators must stay abreast of local tax laws and regulations, which can change frequently. This includes understanding the tax implications of expanding into new markets, the deductibility of specific expenses, and the application of any tax credits or incentives. Engaging with local and global tax experts and maintaining compliance with all tax obligations is essential to operate successfully in the global online casino market.
Conclusion
We hope this guide was helpful for general information. Gaming or gambling businesses need expert legal advice to setup correctly and Cadena is experienced in international tax and structuring to assist.
Disclaimer: This material is produced by Cadena Legal, a NSW-registered legal practice. It is intended to provide general information and opinions on legal topics, current at the time of first publication. The contents do not constitute legal advice and should not be relied upon as such. Contact us here for advice.
