Romania’s casinos licensing framework includes several positive provisions, but land-based operators still face issues with taxation and competition from slots parlours explains Ana- Maria Baciu, partner at law firm Nestor Nestor Diculescu Kingston Petersen.
Could you give a brief overview of the legislation covering casinos in Romania?
In order to offer casino services in Romania – either land-based or online – an operator must obtain a licence and an authorisation. Licences are valid for 10 years, while the authorisation is valid for one year and must be renewed on annual basis. Compared with the wider gambling industry, the regulatory conditions to establish a land-based casino are probably the most cumbersome. For instance, a casino may be placed only in specific premises, hotels with a minimum three stars ranking or business residences; the location must have a specific configuration and equipment, i.e. a minimum number of gaming tables, a CCTV network, internal rules regarding the flow of money and chips etc.; additionally, the venue must be inspected by both the regulator and the police in order to be granted the authorisation.
What are the major issues affecting the Romanian casino market at present?
From our point of view, the most important issue affecting the Romanian land-based casino market relates to taxation. The cost of the licensing and authorisation fees, as well as the rate of corporate tax incumbent upon a casino operator are considerably higher by comparison to almost all other categories of gambling. This is probably the reason why several casinos have declared bankruptcy in the last few years.
In this context, based on the information published on the National Gambling Office website, at this moment there are only five land-based casinos licensed in Romania. Another damaging factor for the casino industry stems from the structure of the licensing framework. According to the regulations, slot-machines fall under a different type of licence. Given that the costs of such licences are significantly lower compared to the casino licence, there are hundreds of operators which currently hold the slot-machine licences and are able to offer one of the most attractive products which is generally present in casinos, namely the slotmachine.
Additionally, in order to enter a casino it is necessary to pay an entry fee. The amount established by the legislation for such ticket is RON 50 (approx. E10) and the ticket is valid for 24 hours. From an operational perspective, this additional cost may be regarded as a barrier in attracting customers into the casino, since players may be tempted to opt for other types of gambling venue.
More generally, what are the strengths and weaknesses of the current legislation covering gambling in the country?
Romanian gambling regulation includes several positive provisions which may be considered business- oriented. Gambling activities may be exploited either directly by the licensee or jointly, with the licensee working in partnership with other entities.
In the latter situation, it is not necessary for every partner involved in the operations to hold a licence in its own name. This benefit allows the creation of gambling “networks” where a licensed operator works with several other entities spread throughout the country which offer their locations for the gambling operations. This type of business model is very widely used in the slot-machine market. Another example of the flexibility of the regulatory framework is that a landbased operator may be used as a payment processor for the online activity, provided that it obtains a Class 2 licence for payment processing. This structure thus permits players registered with an online operator to deposit and withdrawal funds from their online account by relying on the services offered by a landbased operator in its gaming halls. Thus, the relationship between the land-based and online operators creates a “bridge” for those players who want to migrate from land-based gambling to the online platforms.
Additionally, live dealer services for online gambling may be offered not only from a dedicated broadcasting studio, but also from land-based casinos holding the Class 1 licence. In terms of weaknesses, certain issues need to be highlighted. The process to obtain a Class 1 operating licence may be rather bureaucratic and cumbersome for a foreign company which is not familiar with the practice and expectations of the Romanian regulator.
Additionally, the legislation is not completely correlated with the realities of the market. Certain modifications to operations, e.g. the addition of new games on a platform, require a preapproval process which may take quite a significant period of time. Testing laboratories which intend to apply for a Class 2 licence in order to offer certification and auditing services on the Romanian market must secure a E250,000 guarantee, which is rather high by comparison to many other EU jurisdictions.
In terms of the taxation framework for landbased casino operators, what are the positive and negative points?
Strictly from a taxation perspective, it is difficult to identify a clear positive aspect for landbased casinos operations. A land-based casino operator is required to pay, on an annual basis, the licence and authorisation fees. The legislation establishes a the licence fee as E95,000 a year. The authorisation fee is calculated by reference to the gaming tables, such being E60,000 per table, in case the casino is located in Bucharest, or E30,000 per table, outside the capital. Given that the legislation requires a minimum number of gaming tables to be installed in a casino – 12 tables for casinos located in Bucharest or 10 tables for other locations – this annual authorisation fee is significant.
Besides these fees, a land-based casino operator is also required to pay an annual contribution of E1,000 to the public foundation for responsible gambling, which is yet to be created, and also establish a guarantee fund as a security against the risk of non-payment of the obligations to the Romanian budget. The amount of such guarantee is also determined by taking into account the gaming tables, being E10,000 for each table, but not exceeding more than E175,000.