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Recent updates to VAT treatment of eGaming services

AUTHORs: Matthew Broadstock co-author(s): Dara Higgins Services: Tax DATE: 20/06/2022

The Irish Revenue Commissioners (“Revenue”) have recently updated their guidance material in respect of the VAT treatment of eGaming services (the “Guidance”).  The EU VAT Directive and Council Implementing Regulation 282/2011 provide that the supply of games including games of chance (defined as "eGaming") which are delivered via the internet are to be regarded as an 'electronically supplied service' for VAT purposes.  As such, eGaming services supplied to consumers are taxed where the consumer is established, has a permanent address or usually resides. eGaming services supplied to Irish consumers are subject to the standard rate of Irish VAT (currently 23%).

Revenue have announced certain updates to the Guidance in Revenue e-Brief 112/22 published on 21 May 2022 which are summarised below.  These updates provide some welcome clarity to the methodology to be applied when calculating the VAT liability on supplies of eGaming services to Irish customers.

Revised definition of 'Gaming'

The definition of 'Gaming' has been updated to expressly exclude the acceptance of bets which is confirmed to be VAT exempt in accordance with Paragraph 10 of Schedule 1 of the Value-Added Tax Consolidation Act 2010. For completeness, the definition for 'Gaming' as contained in the Guidance is as follows: "Gaming means playing a game (whether of skill or chance or partly of skill and partly of chance) for stakes hazarded by players. This contrasts with bets on the outcome of sports events".

Taxable Amount Calculation Methodology for Random Generator Games

In the previous iteration of the Guidance, Revenue had regarded the taxable amount for eGames which are operated by a Random Number Generator ("RNG") as being the net revenue actually received by the eGaming operator (ie, the total amount staked by the customer less the value of the winnings paid out to the customer).

However, the Guidance now provides that the taxable amount should be calculated by identifying two components. The first component is the value of the stakes entered by the players into the common pool from which winnings are paid out. The second component is the value of stakes retained by the e-gaming operator.

The Guidance further explains that where RNG games are played across multiple jurisdictions, the net revenue from Irish players' stakes is to be identified by the operator and taxed at the standard rate of Irish VAT (currently 23%). The net revenue is described as the total value of Irish stakes less the percentage of those stakes which represent the Irish players' contribution to the common pool from which winnings are paid out.  It confirms that the taxable amount is not linked to the winnings or losses of the individual players in Ireland, as, even if a player in Ireland wins the pot, the components remain the same.  The Guidance includes a helpful worked example for illustrative purposes. 

There has been no change to the VAT treatment of bonus plays, free plays and other forms of promotional discounts with such items continuing to be excluded from any calculation of the taxable amount.

If you would like to discuss how to ensure your business can navigate the changes that will arise from these updates, or indeed discuss any other matters, please contact Matthew Broadstock or your usual Matheson contact.