Dutch licensing: operator requirements

Maarten Hoelen and Esteban van Goor of Baker & McKenzie Amsterdam look at what operators will need to take into account as they prepare for the imminent licence application process in the Netherlands.

The current Dutch legislation with respect to games of chance is more than 50 years old. In 2014 the Dutch Ministry of Security and Justice published draft legislation regarding remote games of chance, i.e. Remote Betting and Gaming legislation (regulation and taxation).

On Thursday, July 7, 2016, the Dutch Gaming Bill (“Bill”) passed Parliament (the Lower House). The bill will still need to be approved by the Senate. Consequently, the expected date of implementation is not yet clear. However, Parliament did mention that the Bill is expected to enter into force in the second half of 2017.

The Bill aims to regulate iGaming offered to Dutch players, and will have an impact for iGaming operators once implemented. In this article we describe the most important changes and (compliance) obligations for iGaming operators who would like to obtain a licence in the Netherlands.

We have also included a few takeaways for iGaming operators to take into account when offering games to Dutch players in the future.

Operator requirements
Currently, iGaming is not regulated in the Netherlands. The Dutch Bill will introduce the possibility for iGaming operators to obtain a licence allowing them to offer online games of chance to Dutch players. Under the new Bill, an iGaming operator will need to fulfill certain conditions to obtain a Dutch iGaming licence. In brief, these are as follows:

• The licence applicant (“requestor”) must be a legal entity established in a jurisdiction that is part of the European Union or the European Economic Area;
• The requestor must disclose its legal structure and its ultimate beneficial owners, and the requestor should not be affiliated with a formal or factual control structure which creates unclarity regarding the legal structure;
• The continuity of the requestor is guaranteed;
• In the case of a licence being issued, it is important that the licensee organizes the remote games of chance in a responsible, reliable and controllable way;
• The systems and processes of the operator need to be controlled by a third party;
• The operator will need to have systems in place for KYC and AML purposes;
• The systems of the operator should also include mechanisms for tracking players and preventing player addiction;
• Data must be readily available to the Dutch Authorities (e.g. the Netherlands Gaming Authority and tax authorities) in order to perform an audit.

With respect to the licence, it is important to be aware of the fact that the Bill refers to certain obligations and limitations which will be dealt with through implementing legislation. This legislation is yet to be published, but will implement the following:

• The licence will be granted for a temporary period only (period to be established by the implementing legislation);
• The licence will be non-transferable;
• A fee for obtaining a licence (amount to be established);
• The licence will state the types of games which can be offered with that licence.

Dutch Betting and Gaming Tax changes and VAT treatment
Currently, non-resident iGaming operators offering games of chance to Dutch players are not subject to Dutch Betting and Gaming Tax. However, based on the Bill, iGaming operators holding a licence will be regarded as taxable persons for Dutch Betting and Gaming Tax (for operators not holding a licence and continuing to offer games of chance to Dutch players illegally, the Dutch Betting and Gaming Tax consequences will remain unchanged). 

Consequently, in the case of an iGaming operator (Dutch based or a non-resident company) holding a licence to offer games of chance, it will need to:

• Register for Dutch Betting and Gaming Tax.
• Report and pay Dutch Betting and Gaming Tax of 29% of gross gaming revenue.
• Comply with Dutch legislation in relation to record keeping.

All games of chance falling within the scope of the Dutch Betting and Gaming Tax act are VAT exempt in the Netherlands. Consequently, no Dutch VAT will need to be charged by the operator to players.

Key takeaways for operators
iGaming operators who are interested in obtaining a licence can apply when certain conditions are fulfilled. When preparing their licence application, an operator will need to take into account the following:

• Their future legal structure needs to comply with the requirements discussed before (legal entity and transparency obligations). 
• When setting up a legal structure, data from Dutch players needs to be saved and should be secured separately, as data privacy rules need to be obeyed;
• The legal entity should have a proper administration in line with the Dutch Gaming Bill and Dutch (tax) law, in order to meet the record-keeping requirements and to be able to show the authorities the requested information on demand. In relation to this, it is important to undertake  an analysis of exactly what information needs to be made available;
• When setting up a legal structure, it is also important to take VAT consequences into account, i.e. in relation to non-recoverable VAT, as games of chance falling within the scope of the Betting and Gaming Tax Act are VAT exempt in the Netherlands. Thus, imputed VAT incurred in relation to the Dutch games is in principle not recoverable;
• When setting up a legal structure from abroad it is also important to take into account CIT issues e.g. permanent establishment risks which could trigger profits being taxed in the Netherlands.

We recommend operators research the possibility of obtaining a licence by use of a Dutch legal entity. This will allow them to meet the stipulated requirements (such as those relating to data privacy rules and administrative conditions) via that entity. As the bill passes through the Senate and the implementing legislation is published, please look out for future updates on these related developments in iGaming Business.

Maarten Hoelen is a partner with the Amsterdam Tax practice group specialising in Dutch corporate tax law and international restructurings.

Esteban van Gooris a tax lawyer working with the indirect tax department of Baker & McKenzie Amsterdam, with a special focus on VAT aspects occurring within the digital economy.