Gambling and betting laws in Cyprus - The possibility of foreign companies to operate in Cyprus
Contributed by Oxford Tax Solutions
15 January, 2021
During 2004 and after Cyprus has joined the EU, online gambling service providers licensed in other EU member states have exploited the legal ambiguity and flaws that existed in Cyprus, which allowed them to operate from premises situated in Cyprus, based on the principle of free movement of services. Due to the absence of any national legislation regulating the market, the general norm among the officials was that the ambiguity permitted such kind of services to be operated from Cyprus and that online gambling was legal, because a specific legislation regulating this matter was not in existence.
In 2012, Cyprus introduced the Betting Law 2012, as amended in 2019 (the "Law"), which regulates the betting activities. The Law falls within the jurisdiction of the Ministry of Finance, which also deals with its amendments, regulations and directives. The Law clarified the legislative framework in relation to these activities as well as filled some gaps which were missing from the Cyprus legislation. Gambling is owned and operated by the state only to a limited extent, while private entities are permitted to offer gambling activities subject to the provisions of the Law.
The following betting services are strictly prohibited in Cyprus either in land-based premises or via online platforms:
- Betting on horse races;
- Limited betting games machines;
- Spread betting;
- Dog racing; and
- Bitcoin gambling.
The National Betting Authority (the "NBA") is the supervisory authority of all the gambling activities in Cyprus. The responsibilities of the NBA include examining applications, licensing, auditing and supervising betting shops and online betting operators as well as examining any complaints and suspending any licenses in relation to those.
There are two forms of license available under the Law:
- The Class A license, which regulates land betting services within physical licensed premises, excluding Class B services (online) and horseracing; and
- The Class B license, which regulates online betting services excluding slot machines, online casinos and lotteries.
Therefore, Class A license is about the services without the use of the virtual world while Class B license is exclusively about online activities. Licenses are issued for one or two years and may be renewed subject to the approval of the NBA. The transfer of an operating license is strictly prohibited. A company seeking a license under the Law must have its corporate seat in Cyprus or have a branch (overseas company) in Cyprus with its main activity being the conducting of betting activities. Also, its share capital must be at least EUR 500,000 either authorized or issued. The application has to be accompanied by a bank guarantee from a banking institution operating in Cyprus or in an EU member state for the amount of EUR 550,000, the validity of which should be for a period of six months after the granting of the license to the applicant. Also, the NBA requires any applicant to demonstrate that it has sufficient resources to pay the playersÃÂ¢Ã¢âÂ¬Ã¢âÂ¢ winnings, it has adequate accounting and control systems and that it can comply with regulations, as given by the NBA, for the protection of the players.
It is widely known, that based on the anti-money laundering legislations enacted in Cyprus, a service provider must, in order to carry out a transaction or enter into a business relationship with another person, perform a due diligence procedure for client identification purposes. The Law extends the due diligence obligations of any Class B licensee and the following information need to be obtained for a player to be able to be registered:
- Confirmation that they player is over 18 years old;
- Identification of the player;
- Address of the residence of the player;
- Valid email address of the player; and
- Declaration that the player has been informed for the terms and the way of conducting the bet, including the remuneration to be possibly given to the Class B licensee.
In cases where the Class B licensee perceived that the person has given false information, the licensee is obliged not to register that person and in cases where the person has already been registered, then the licensee is obliged to cancel the registration. Also, the Class B licensee has an obligation to verify the identity of the player within 30 days from the date of registration and to keep in an electronic form, a list with all the registered players under the specific platform.
Companies with licenses in other EU member states to perform betting services within the meaning of the Law (only for the services allowed by the Law) can provide those services in Cyprus before being issued a license from the NBA as long as they apply for a license within one month of notification of the date on which the NBA will accept applications for a license, as per article 101.3 of the Law.
The Law does not make any reference in regards to whether a licensed person in Cyprus can provide online betting services to people residing outside the territory of Cyprus. Therefore, a Cyprus company can provide such services in any country besides Cyprus subject to the legislative framework in place in the country of residence of the intended recipients of such online betting services. However, the provision of online betting services to people residing in Cyprus by a non-licensed entity (whether located in Cyprus or not) is expressly forbidden, unless the requirements illustrated above are fulfilled.
Satellite casinos is also a much discussed issue in recent years in Cyprus. According to the Operation and Control of Casino Law of 2015 (124(I)/2015), any licensed administrator of a casino can operate until four facilities of satellite casinos, beyond the casino resort. The satellite casinos must be located in Cyprus and can only operate in support of the licensed casino resort. Hence, the provision of online services relating to satellite casinos to people residing outside the territory of Cyprus is permitted provided that any requirements of the foreign country are fulfilled. On the other hand, the provision of satellite casino services to persons residing in Cyprus from entities outside Cyprus is expressly prohibited by virtue of the Operation and Control of Casino Law of 2015 (124(I)/2015). Particularly, no person may provide any services or facilities for casino games or gaming machines in Cyprus without a valid license issued by the National Gaming and Casino Supervision Authority.
In summary, it is concluded that an entity registered and licensed in Cyprus is able to provide any online betting services or online satellite casinos services to any country outside Cyprus provided that the laws and requirements of the specific country are followed. Contrariwise, any foreign licensed company registered outside the territory of Cyprus cannot provide such services unless it has a license by the National Betting Authority or the National Gaming and Casino Supervision Authority respectively.
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