888 Contemplates Exit from Germany, Cites Tax and Regulatory Challenges
Online gambling operator 888 Holdings is considering its exit from Germany after a recent court ruling banned its operations in the country and due to uncertainty over a potential VAT bill for services it had provided to German customers prior to 2015.
The operator reported a 4% revenue increase for the year to December 31 to $541.8 million. However, its pre-tax profits dropped 68% to $18.8 million on the back of exceptional charges, including a multi-million fine from the UK Gambling Commission and the VAT bill in Germany. 888 said that the exceptional charges totaled nearly $51 million last year.
Last summer, the gambling regulator in the UK slapped a £7.8-million fine on the online gambling operator for repeated failures to protect vulnerable customers.
In Germany, a recent ruling by the country’s Federal Administrative Court in Leipzig (Bundesverwaltungsgericht) practically banned online gambling operations provided by 888 and other gambling companies in several German states.
The company seems to be contemplating its departure from Germany.
888 further pointed out that a number of local banks are now refusing to process gambling-related transactions, which further hampers gambling companies to operate in the country. Here it is important to note that Germany is yet to adopt a uniform gambling law after years of attempts to craft that law and to have it successfully approved in the country’s all 16 states.
In other words, companies operating in Germany are actually providing their services in a gray area.
888’s tax issue seems to be dating back to several years ago. Last year, the company said in a statement that it was not certain whether it was liable to VAT for providing online gambling services in Germany before 2015. The company’s uncertainty was triggered by the new rules introduced by EU policymakers in early 2015 regarding the provision and taxation of electronic and other services within the union’s borders.
Under those new rules, electronic services are taxed in the location of consumption rather than the location of provision. The gambling operator has been contending the potential retrospective implementation of the tax on its operations in Germany prior to 2015 and has said that it would challenge the matter in court, if it was asked to pay VAT. The company has estimated that it could be required to pay the amount of $18.5 million in VAT on its services in Germany prior to 2015.
It has also been revealed that 888 has already sought legal advice regarding its liability to VAT and based on that advice has continued to contend that no taxes on its German operations should be triggered at all.