ZRP
Tuca Zbarcea & Asociatii

Opinion on the changing of the taxation mechanism for revenues derived by individuals as a result of participating to online gambling

27 Martie 2018   |   Lucian Barbu, Tax Partner & Mihai Șerbu, Senior Tax Advisor - NNDKP Tax Advisory Services

Beyond the salutary aspects of this legislative amendments, such as that it clarifies that the tax is applied to the amount actually withdrawn from the gaming account, there are also some negative aspects that need to be pointed out.

Lucian Barbu, Tax Partner & Mihai Serbu, Senior Tax Advisor - NNDKP Tax Advisory Services

 
 
Romania is changing the taxation mechanism for revenues derived by individuals as a result of participating to online gambling: such revenues will be subject to taxation through the withholding mechanism. Thus, following the entry into force of an amendment to the Fiscal Code included in the Emergency Ordinance adopted by the Romanian Government on 15 March 2018, published in the Official Gazette on Friday (March 23, 2018) night, the on-line gambling organizers will have the obligation of withholding the related tax from each withdrawal performed by the player from the account opened on the gaming platform. 

In this respect, on-line gambling organizers will have the obligation to declare and pay the tax withheld until the 25th of the month following the one in which such was retained, as well as submit an annual informative statement regarding the tax withheld by 31 January of the following year.


The old mechanism whereby players were required to file the tax statement regarding the revenues obtained by May 25th of the year following that in which the income was realised, after which the tax authority would calculate the tax due and issue a tax decision which the player was required to pay within a 60 days term has generated many controversies and criticisms. In principle, the withholding taxation mechanism will simplify both the life of the player - who will no longer need to worry about the reporting and payment of the tax amount resulting from the tax decision, as well as the life of the tax authority - which will no longer have the burden of the administration of tax receivables for tens of thousands of taxpayers (respectively the recovery of amounts due). Except for some initial system adaptation costs (including reporting in tax returns), in the long run, the application of the tax withholding mechanism instead of the self-declaration system could be considered beneficial even for gambling organizers - given that the discussed proposal came from the representatives of these organizers.



Beyond the salutary aspects of this legislative amendments, such as that it clarifies that the tax is applied to the amount actually withdrawn from the gaming account, there are also some negative aspects that need to be pointed out. First of all, the abrupt switch to the withholding taxation system, without allowing an adequate period of time for organizers to adapt their systems to comply with the new obligations, will most likely generate significant difficulties and dysfunctions at the level of these operators, some of them estimating that the adaptation of their IT and reporting systems could take several months to complete. Unfortunately, it seems that the legislator did not perform a thorough analysis of this issue regarding the need to allow enough time for gambling organizers to implement the withholding mechanism at a technical level. In this respect, within the transition period, some of the remote gambling organisers might be found in the position of bearing the tax themselves, without performing the withholding of tax from the players' withdrawals, which will obviously generate additional costs and could even lead to the player's expectation for the organizer to never withhold the tax from the requested withdrawal amount again.

Also, reducing the time available for preparing and submitting the informative statement (from 28/29 February to 31 January) will generate additional pressure on the gambling organizers, taking into account that usually the beginning of the year is already a hectic period from a financial-reporting perspective.

In any case, on-line gambling organizers will have to burn the candle at both ends in the upcoming period to comply with the new regulations, both in terms of withholding of tax as well as for ensuring compliance with the monthly declaring and payment obligations.

 
 

PNSA

 
 

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