Operators Challenge Peru In Online Gambling Consultation

May 24, 2023
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Offshore operators have objected to tax and incorporation plans, as the government of Peru publishes the results of a consultation on draft regulation to implement the country's 2022 online gambling and sports betting law.

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Offshore operators have objected to tax and incorporation plans, as the government of Peru publishes the results of a consultation on draft regulation to implement the country's 2022 online gambling and sports betting law.

A report and public comments published on Friday (May 19) by Peru's Ministry of Foreign Trade and Tourism (Mincetur) demonstrates that although the government is open to clarifying the text of the 2022 law, significant changes will have to wait for congressional approval of Bill 3595/2022 that will fix the loopholes in the original legislation.

The draft regulation published by Mincetur in November received a total of 772 comments, many of them from key players such as Betsson-owned BML Group Ltd and the Peruvian Association of Sports Betting (APADELA).

Among the most-commented on articles of the draft regulation was Article 5, which states that entities eligible to obtain licences for remote gaming and sports betting could include legal entities incorporated in Peru, as well as “legal entities incorporated abroad that have branch offices in Peru in accordance with the provisions of the General Law of Corporations”.

The article also clarifies that “foreign legal entities must incorporate a company in the national territory”.

Betsson and APADELA both took exception to the article.

APADELA, which counts Betcris, Apuesta Total and Betsson as members, asked the government to “evaluate the legality” of the second part requiring legal incorporation in Peru.

The association argued that it was contradictory to the provisions of the sports betting and remote gaming law and “could be in violation of the constitutional tax principles of legality and reserve of law, given that … the scope of application of all taxes in force in the country cannot be established by means of a regulatory rule”.

The association also said that if the provision was deemed legal, it should be made clear that foreign operators must establish a subsidiary in Peru that is not just a representative office.

“This is in line with the equality of conditions between local and foreign operators, as well as to avoid that participants in this industry do not pay taxes,” they wrote.

The government answered simply that the relevant article of the law established that companies required to pay the tax would be both “legal entities constituted in Peru and the branches of legal entities of juridical persons constituted abroad that exploit remote games and/or remote sports betting developed in technological platforms”.

Article 40 of the 2022 online gambling law attracted harsh criticism when the text of the legislation was finalised last summer.

Legal observers claimed that it could be construed as allowing any operators based abroad without a local branch in Peru to escape paying the headline 12 percent tax on net winnings.

In its comments on the draft regulation, Betsson was particularly concerned with the provision of Article 5 of the draft, which states that “for all legal, administrative and tax purposes, games and bets carried out remotely are considered as operations carried out within the Peruvian territory”.

The operator sought clarity on the point, as well as noting several ways it could be interpreted as illegal.

In response, Mincetur stated that “holders of the authorisation for the operation of technological platforms of remote gaming or remote sports betting are: legal entities incorporated in Peru, branches established in Peru of legal entities incorporated abroad, legal persons incorporated abroad".

The clean-up bill to fix perceived errors and loopholes like the one in Article 40 of the original law is expected to be approved in the near future, having been voted out of the National Congress' finance committee last month.

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