Bwin-party has announced that the new European Union tax rules on digital services will cost the company â‚¬15 million ($16.9 million) in 2015.
The EU rules, which came into force at the beginning of this year, state that online poker operators will now have to pay value-added tax, or VAT (essentially “sales tax” in the US) at the point of consumption.
This means that they will be taxed according to the fiscal laws of the country in which the user resides, rather than the country where the operator is based.
Some EU countries apply VAT to electronic services, and some don’t; and online gaming operators, unsurprisingly, have historically based themselves in countries where they don’t.
“While it has for some time been accepted that gambling is exempt from VAT, the new rules offer some flexibility, subject to certain limitations and restrictions, for certain Member States to apply VAT and as a result there has been some uncertainty over whether it could or should apply to gambling or not,” Jay Dossetter, Head of Media Relations at bwin.party digital entertainment, explained in an interview with PokerNews.
“As a result, the Board has today announced that it expects to file for and pay VAT in certain EU Member States and that in 2015 total net revenue and cash-flow will be reduced by approximately â‚¬15 million($16.9 million) before any mitigating actions.”
It comes at a bad time for bwin-party.
The company may, in partnership with the Borgata, be the market leader in the New Jersey online poker space, but that’s a drop in the ocean compared to the European sportsbetting market, bwin-party’s bed and butter, and results there in 2014 were disappointing.
Rumors have been swirling since early summer that a sale of all or part of the company’s assets was in the cards, with Amaya Gaming and Playtech purportedly interested.
Meanwhile, the new VAT rules will hit bwin-party hardest in the German market, from where 26 percent of its revenues are derived. It will now be forced to pay the German VAT of 19 percent on all these revenues.
But, of course, it’s not just bwin-party that will be affected by this; it’s all regulated operators that cater to the European market, and it’s likely there will be some kind of trickledown effect on the European poker player.
Where operators have incurred tax hikes in individual countries in the past, such as those in France, Italy, Spain and, most recently, the UK, it has usually been the player who suffers, in the form of rake increases and curtailed bonuses.
However, for the time being at least, partypoker players will not notice any detriment to the player experience. “We don’t have any direct plans to in terms of that at the moment,” Dossetter said. “We are looking at ways we can mitigate the losses. But, there are no plans to change the direct player experience given to the issue at the moment.”