Constitutional Court of Belgium invalidates a 2016 constitutional amendment which calls for gambling operators to pay 21% VAT

The Constitutional Court of Belgium invalidated a 2016 constitutional amendment on Thursday which called for online gambling operators to pay a 21% value-added tax on their Belgian operations.

The online gambling market was regulated by Belgium in the early 2010 when amendments to the Gaming and Betting Act of 1999 were publicised in the Belgian Official Gazette. The amendments came into force on January 1, 2011 to permit international gambling operators to apply for licenses from the Belgian Gaming Commission and operate in a regulated environment.

The Belgian Finance Ministry in 2016 successfully advanced a bill that proposed for online gambling services to become taxable under the country’s VAT laws. The new taxation regime came into effect on August 1, 2016.

In most general case Gaming and betting transactions are exempt from VAT. The Belgian government justified its decision to alter the status quo in 2016 with the need for new revenue sources and for a major boost to the country’s tax income. It was estimated that the termination of gambling and betting companies’ VAT exemption could generate the additional amount of €39 million for Belgium’s coffers.

Malta-headquartered gambling operator Kindred Group (previously Unibet Group) was among the first to comment on the latest tax developments in Belgium and the Constitutional Court decision. The company has previously challenged the introduction of VAT on online gambling operations, slamming it as “unfair” and arguing that it undermined “policy objectives” and lowered channelisation by affecting consumer protection.

Last week in a statement Kindred stated: “The ruling also points out the inherent incompatibility between consumer protection and tax revenue objectives, especially when products (lotteries vs other products) and channels (retail vs online) are treated differently.”