In previous newsletters we have already discussed two changes that took effect on 1 July: the introduction of the sharing economy and the change in the VAT exemption for cost-sharing associations. A third change slipped in almost under the radar: the abolition of the VAT exemption for online gambling.
1. Limitation of the VAT exemption for gaming and betting from 1 July
Up until 30 June, the VAT exemption for gaming and betting covered all gambling, regardless of whether it took place in physical or online environments. On 1 July the law changed: online forms of gambling, such as sports betting and online bets on horse races, are now subject to VAT at the rate of 21%.
Physical forms of gambling on the other hand are still exempt from VAT. So when a slot machine is installed in a casino, the operator is still not required to hand over any VAT. And lotteries, regardless of whether they’re conducted electronically or not, are still not subject to VAT.
There was some opposition from the sector to the introduction of 21% VAT on online gambling. They were concerned both about unfair competition between the VAT-exempt National Lottery and the private sector, and that the move could stimulate growth of the black market, leading to the proliferation of illegal sites.
2. Definitions of “forms of gambling” and “lotteries”
On 1 July, the definition of what exactly is meant by “forms of gambling” was moved from Royal Decree No. 45 to Clause 1 of the VAT Code. For VAT purposes, “forms of gambling” means:
- Games which provide an opportunity to compete for prizes or premiums in cash or in kind, in which participants cannot intervene, either at the start, during the game or at the end, and where winners are determined exclusively through the drawing of lots or some other form of chance determination;
- Games which provide an opportunity to compete for prizes or premiums in cash or in kind, offered to participants in a contest of any nature, unless the contest has the result of creating a contract between the winners and the contest organiser.
“Lottery” has now also been defined for VAT purposes as “any opportunity to compete for prizes or premiums in cash or in kind by means of the purchase of shares of participation, in which the winners are determined through the drawing of lots or another form of chance determination over which they cannot exercise any influence.”
3. For what things must VAT be included?
Just as for other services, VAT must be included in everything the online gambling provider receives as consideration from participants for being allowed to take part in the gambling.
It is inherent in some forms of gambling that participants can win back some or all of their stake. If this is the case, the organiser does not have to charge VAT on the portion of a stake that is distributed as winnings.
If the winner of the online form of gambling receives a prize in kind, the taxable amount is reduced by the normal value of this prize. Since taxes, duties and charges are part of the taxable amount, VAT is calculated on the wagered amounts – including the gambling tax, because online forms of gambling are of course still subject to this separate tax on gaming and betting.
So VAT is only calculated on the actual gross margin achieved.
4. Online forms of gambling offered by foreign organisers
When a Belgian resident makes a wager on an online gambling website, Belgian VAT is payable. Foreign organisers therefore run the risk of having to pay Belgian VAT if they take bets from people living in Belgium. In theory, they should apply for Belgian VAT numbers and comply with all associated VAT obligations (e.g. periodically submitting VAT returns).
But if all the foreign organiser does is offer these electronic services, and if it is already identified for VAT purposes in another EU member state, then it can choose to declare its turnover in that other EU member state using a MOSS return.
What if it subsequently transpires that the foreign organiser of the online gambling has not paid Belgian VAT in relation to the Belgian bets because it had not applied for a VAT number in Belgium or any other EU member state? In that case, the VAT authorities can recover this Belgian VAT from the individual gamer him or herself. To this end, a specific reference to joint and several liability was introduced into the VAT legislation. Gamblers have been warned ...
5. Entry into force delayed
In theory, the VAT exemption for online forms of gambling was abolished on 1 July 2016. However, on that same day the Minister stated that the application of VAT would only come into force on 1 August 2016, allowing the affected sector to prepare for the new arrangements.
In the same message, the Minister confirmed that a circular would be published in the near future to explain the practical aspects and consequences of the new rules.