Gibraltar soon to pay UK’s POC tax

Gibraltar soon to pay UK’s POC tax

The decision for Gibraltar whether or not to pay the Point of Consumption tax imposed by the UK has been a long time coming. Now the Court of Justice of the EU (CJEU) has decided that the territory and the UK have to be treated as one.

Point of Consumption tax

The UK introduced a 15% tax rate on online casinos and other gambling operators back in 2014, which everyone had to pay as long as they were offering their services to UK customers. It didn’t matter where the operator was actually located. As a tax haven for big gambling operators Gibraltar decided to sue against the tax citing Article 56 of the Treaty on the Functioning of the European Union, which prohibits a “restriction to provide services” within the EU.

Some gambling operators were forced to leave the UK after the introduction of the tax. Gibraltar has been waiting on a decision by the CJEU, but things were not looking good when Advocate General Maciej Szpunar recommended a few months ago that Gibraltar and UK be treated as one entity in this regard.

A single member within the EU

In a preliminary ruling the CJEU now defined the UK and Gibraltar as one territory. Whilst Gibraltar will retain its special status, when it comes to the EU and how laws should apply, the two need to be considered as one entity – part of the same member state.

The official ruling has yet to be released, but nobody is expecting any significant changes here.

Consequences for gambling operators

Some of the biggest gambling operators in Europe and especially the UK are based in Gibraltar. Among them bet365, William Hill, Cassava Enterprises, bwin and others. A total of 33 gambling operators and 3,200 employees live in Gibraltar, benefiting from its low tax rate.

Now that it’s clear that the POC applies to these operators, the question is what they might do. Will there be an exodus to Malta? In light of the Brexit negotiations that is a very real possibility. Gibraltar overwhelmingly voted to remain in the EU and thus part of the Single Market. It is expected that Brexit negotiations over Gibraltar will be toughest, especially since Spain gets to have a say as well and Spain would love nothing more than to have Gibraltar return to the mainland.

Right now it’s difficult to say what gambling operators might do. For the time being they’re likely to simply pay the tax, but depending on Brexit negotiations, things may soon change.

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