Martin Yakimov, Lawyer at Velchev & Co, Explores Fee Hikes Impact on Bulgaria's Gambling Industry
Martin Yakimov, Lawyer at Velchev & Co, examines the impact of increased state fees on Bulgaria's gambling industry under the State Budget Act for 2024
In a recent development, Bulgaria has made substantial amendments to its State Budget Act for 2024, impacting the gambling sector. These changes, effective from January 1, 2024, have brought about considerable increases in state fees for both online and land-based B2C operators.
Gambling.Re sought the insights of Martin Yakimov, Lawyer specializing in gambling legislation at Velchev & Co (Bulgaria) to shed light on how these fee hikes are expected to influence the dynamics of Bulgaria's gambling industry.
According to Mr. Yakimov, the following state fee increases were adopted:
The one-off fixed component of the state fee for maintaining the license for online gambling was increased from BGN 100,000 to BGN 400,000 per license;
The one-off fixed component of the state fee for maintaining the license for land-based casinos was increased from BGN 100,000 to BGN 300,000 for the 5-years license and from BGN 200,000 to BGN 600,000 for the 10-years license respectively.
The one-off fixed component of the state fee for maintaining the license for land-based gaming halls with 5 years duration was increased from BGN 25,000 (for gaming halls in cities with population of up to 500 000) and BGN 50,000 (for gaming halls in cities with population more than 500 000) to BGN 75,000 and BGN 150,000 respectively. In the same time the cost of the 10-years license has increased from BGN 100,000 to BGN 150,000 and respectively BGN 300,000 based on the population of the city.
Similar to the other types of gambling two-component state fee model was introduced regarding the maintenance fee for the licenses for land-based sports betting, lottery games, bingo, keno and betting on random events as well. The newly introduced one-off fixed component was adopted in the amount of BGN 300,000. Major changes were introduced in the monthly variable license maintenance state fee as well. The previous 15% over the total amount of bets was changed to 20% over the Gross Gaming Revenue (‘GGR’) which equalized the state fees between the online and the land-based segment.
According to Mr. Yakimov, it was decided that the increased state fee amounts will be applicable not only to the newly licensed operators but the already licensed operators will have to pay the difference proportionally, based on a special formula, depending on the remaining term of the license.
When it comes to the effects of the amendments on the overall market dynamics within the country’s gambling industry, Mr. Yakimov noted as follows:
Firstly, it shall be noted that increased fees constitute a notably higher entry barrier for new operators on the market which may slow down the market developments.
Secondly, it is expected that the increased state fee will affect the land-based segment the most since the one-off fixed component which is drastically increased is due per license and each land-based casino, gaming hall or other site requires a separate license to be hold. As an outcome a single operator would have to pay the increased amount multiple times depending on the number of his venues in a very short timeline. This is expected to lead to serious financial difficulties and in some cases - to exit from the market, for some of the smaller operators which may consolidate the market in favour of the bigger operators.
Last but not least, it is expected that the changes in the monthly variable license maintenance state fee for the land-based sports betting will lead to increased interest by the operators in this market segment. Unlike the rest of the changes, replacing the 15% over the total amount of bets taxation model to 20% of the GGR will actually be beneficial from long-term taxation perspective. This combined with the fact that following the amendments the monthly variable component of the state fee is now equal to the online sports betting more and more operators are looking into entering and/or increasing their stake in this market segment.