Ukraine enacts bill preventing gambling firms benefiting from streamlined taxation

Ukrainian President Volodymyr Zelenskyy has enacted a bill preventing gambling firms from benefitting from the simplified 2% taxation system brought in following the Russian invasion.

After Russia invaded Ukraine in February 2022, the Ukrainian government adopted a law that provided the opportunity for Ukrainian businesses to switch from the existing tax system to a more simplified taxation model.

Under the old law, taxes were paid as follows: gambling operators had to pay an 18% gross gambling revenue (GGR) tax or 10% turnover tax on revenues received from the use of slot machines as well as a general 18% corporate income tax.

Lottery operators had to pay a 30% GGR tax and a general 18% corporate income tax.

In addition, winnings were also subject to an 18% personal income tax and 1.5% military tax, which had to be withheld by the gambling or lottery operator as a tax agent.

In the simplified model, all businesses, including the gambling industry, were subject to a unified tax of 2% of their turnover.

However, this new system was not well received, and according to Ukrainian MP Yaroslav Zheleznyak, operators went from paying UAH 200,000 (£4,500.62) per day to paying approximately UAH23,000 a day.

Following the simplification of the taxation system, eight operators took advantage of this system, including 1XBet, whad its licence in Ukraine taken away in September 2022 following an investigation that revealed it had ongoing ties with Russia.

Following this, discussions were held in Ukraine’s Parliament about the system’s feasibility for the gambling industry and subsequently MPs, including Zheleznyak, introduced bill 2713-d which aimed to exclude the gambling industry from applying to the simplified tax regime in September 2022.

President Zelenskyy signed this bill off on 6 February 2023.

Ivan Kurochkin, a partner at 4H Agency, gave his views on the ongoing issue of taxation in Ukraine.

Kurochkin told EGR: “From our perspective, the taxation of the gambling industry in Ukraine is one of the challenges that needed to be addressed to make the market more attractive to international operators.

“The bill 2713-d , which sought to lower the tax rates, had been under discussion for the past two years. However, its adoption seems to have stalled.

“That being said, as of today gambling business taxation issue and the problems arising from this issue in Ukraine continue to be a subject of discussion in the Ukrainian Parliament.

“In response to such an issue, a special parliamentary investigative commission was created at the end of 2022 to investigate potential economic violations of various businesses (including the gambling industry),” Kurochkin added

“To add to that, some MPs also highlight certain issues of tax collection from the gambling business. The results of their work are yet to be seen.

“It is encouraging to see that the government is acknowledging the challenges and problems that the gambling industry is facing during the war and continues to undertake watchful steps towards the industry,” Kurochkin concluded.