Turning the page: Ukrainian sports betting begins a new chapter in 2021

With a population of more than 40 million, the legalisation of betting in Ukraine represents a tantalising opportunity for betting operators. Since 2009, after a fire incident in a gaming hall in the city of Dnepropetrovsk (now known as Dnipro), gambling has been prohibited in Ukraine. But after the law to legalise betting was approved by President Zelensky in August 2020, much progress has now been made to turn the policy into practice. The Commission, which will regulate and control the new industry, has been developed and has already appointed six members. Only one more member is left to be appointed. The licence terms have been adopted by the Cabinet of Ministers of Ukraine and were formally legalised on 30 December 2020.

The licence terms importantly give clarity and certainty to operators on what they are signing up to. One important detail included in these terms is that within three years the government will develop an online monitoring system. The aim of the monitoring system is to receive and transfer in real-time information on the deposits and bets of players, as well as paid winnings. We are pleased that there is now a three-year window to set up the technology and processes for this system. The experiences in Russia and Belarus, which have similar monitoring systems in place, have shown the importance of preparation and expertise need to run the system.

A grace period has not been included in the licence terms to allow for operators to be compliant with the certification of relevant equipment though. The regulations state that all obligations regarding the certification of equipment shall be effective starting from 1 January 2021. However, the Commission is yet to confirm the list of equipment that needs to be certified and the use of which uncertified equipment will be illegal. Furthermore, the Commission needs to list the centres where this equipment can be formally certified – both in Ukraine and internationally. This is something that needs to be reformed and confirmed before the industry is relaunched.

Tax reform

The proposed tax system also still needs reform. At the moment, they are proposing an 18% tax on GGR; 18% personal tax on winnings and 18% corporate profit tax. This is unfairly punitive for the industry. Currently, Bill 2713-д, which stipulates abolishing the personal tax on winnings, is being debated in parliament. We believe it is imperative to abolish the personal tax to encourage players to bet on Ukrainian platforms, rather than using services of international websites where they won’t be taxed on their winnings.

The tax on GGR will be postponed for the first few years since the accuracy of this payment cannot be guaranteed without the planned electronic monitoring system. Currently, the law prescribes operators to pay triple the amount of the licence fee until the state system is implemented. For online betting, the figure will be €3,485,000 per year which is uncompetitively high. Once the government is able to accurately calculate GGR, we would recommend a tax of around 5%-10% would be much fairer.

The State Budget of Ukraine for 2021 indicates the state income from granting licences to the gambling industry alone in 2021 will be approximately €225m. This means that a minimum 60 gambling licences in 2021 shall be granted. This suggests that the government is expecting significant interest and investment from international operators. However, if we want this foreign investment in our economy to be sustained and viable in the long term, they need to ensure our market is competitive.

The licensing process itself has been developed to be as simple as possible to help open the market quickly. Many big operators have now already applied for the licence and supplied the required supporting documents. All applications should be considered by 15 days. However, as of yet (first week of January) no licences have been awarded.

After waiting for over 10 years, we are of course eager to obtain our licences, for the new laws to be fully implemented and the industry to finally reopen. However, throughout this process, our lawmakers have rightly prioritised developing an accountable, consistent, transparent and fair market over speed. They have analysed the most successful regulatory frameworks across the world to help create the foundations of an industry which will stand the test of time in Ukraine. There are a few final tweaks required but we are close to opening this exciting new chapter for betting in Ukraine.

Ievgeniia Derbal is chief legal officer at Parimatch and is responsible for the coordination of the legal function at Parimatch Holding. Derbal is based at Parimatch’s head office in Cyprus and specialises in corporate structuring, tax planning and building commodity cashflows.