4H Agency: Understanding Georgia’s new "offshore" licence regime

On 27 June, new regulations for gambling in Georgia were adopted and later officially published. Effective 1 December, licensees for online casinos, online slots and online betting will be permitted to operate “offshore”.

Currently, online licences are tied to a single domain and website. From December, each licence will cover up to two domains/websites. Licensees with two domains must dedicate one to the Georgian audience and the other to foreign players. A single domain can serve any audience. Moreover, the stakes now can be accepted in euros and dollars, not just in local Georgian lari as before.

The inclusion of foreign players in the law is a new development for Georgian regulation. Although this does not significantly change the current practice of accepting all players with a difference in just age verification (18 for foreigners, 25 for Georgians), this amendment has the potential to serve as an alternative to certain offshore licences.

The revised law could facilitate the adoption of a new licensing format, positioning it as feasible substitution for prominent offshore jurisdictions (for instance, the Isle of Man, Curaçao or any other flexible licence jurisdiction).

Furthermore, a new tax will be introduced. Operators serving both local and foreign players must calculate revenues separately. Those serving only foreign players will have a lower tax burden of 5% GGR (only on revenues from foreign players). The current tax of 15% GGR will apply only to operators targeting Georgians. Also, a winning tax in amount of 5% payable by the operator on behalf of player is not applicable for offshore players (except for P2P games).

The annual licence fees remain unchanged:

• Online casinos – GEL5m ($1.7m)
• Online slots – GEL1m ($340,200)
• Online betting – GEL100,000 ($34,000)

There is also a quarterly gambling business fee in addition to licence fee payable by online betting and online casino licensees, ranging from GEL250,000 to GEL300,000 ($85,000 to $100,000). As for the online slots, this is replaced with payment of a full amount of GEL1.01m ($370,400) at once.

It should be noted that the online betting licence is the only licence which is still require a land-based sports betting licence to apply for it. While online casino and online slots licences can be obtained by anyone meeting the criteria, online betting is available only for land-based sports betting licensees.

There are some key requirements for offshore online gambling licence (with a term of five years except for online betting, which is tied to the term of land-based sports betting licence):

• Only a company registered in Georgia can apply for online licence
• Company/applicant must not be in a tax debt
• UBOs/founders/partners of the company/applicant must not have a criminal background
• General source of wealth and KYC checks should be passed (source of funds of the company, incorporation documents, non-criminal record certificate of key persons, etc)
• After receiving a licence, a certification from RSG and integration of monitoring system should be done

All requirements remain the same as for current online gambling licences. There will be no great novelties for offshore types of licences.

Another way to obtain an offshore licence is by acquiring an online licence tied to a land-based establishment. With no licence fee in some territories, a land-based casino allows its licensees to apply for online offshore casino licence at a cost of just GEL100,000.

In comparison to the GEL5m price tag for a separate online licence, online casinos linked to land-based establishments are significantly more cost-effective.

Though, other benefits of offshore online licence remain uncertain. Compared to well-known flexible jurisdictions like Anjouan or Tobique, the Georgian offshore licence is more expensive. Even against Curaçao, where rules are tightening and operating costs are rising, the Georgian licence still falls short.

However, the Georgian offshore licence is a novelty and for operating in the CIS and Eastern Europe countries such white licence from the Georgian regulator could be more legal and clearer than those from distant flexible jurisdictions. Due to the novelty of the offshore licence (and separate online licences themselves), it is hard to predict the demand and the number of operators it will attract.

Nonetheless, the conditions for obtaining, regulations and white-label status give the Georgian offshore licence significant potential for establishing new practices in the CIS region. Any further clarifications and regulations may be introduced before December in this regard. Stay tuned.

Ivan Kurochkin is one of the founders of 4H Agency, and is partner and head of the Eastern Europe desk. After 10-plus years’ experience in consulting every type of client, from testing laboratories to global operators and B2B providers on a variety of matters related to the gambling operations, he has proven himself to be a business-oriented, multi-jurisdictional adviser for entering new markets across the globe.

George Mamulaishvili has been working in the gambling business for more than 10 years and participated in the development of numerous legislative changes. Since 2011, he has been taking a direct role in the process of drafting and introduction of amendments to Georgian gambling legislation. For 10 years, he was the CFO in one of the leading gambling companies in Georgia. He has headed up the administration of the Georgian Gambling Association since September 2021 and is an executive board member of the Georgian Gambling Association since 2018.