The state with the introduction of new legislation seeks to mainly ban the online casinos and illegal bets.
In recent years several businessmen in Cyprus, taking advantage of the lack of legislation in Cyprus, through licensed companies based in Malta (Malta, Cyprus members of the E.U), opened such premises and operated online casinos without the state being able to intervene.
The result was for many bets to be placed illegally, many citizens falling victims to unscrupulous individual entrepreneurs through electronic casinos and the State losing huge amounts from taxes it would receive.
The basic provisions of the new legislation are:
According to Part II of the Act the Council of Ministers, within one month of entry into force of the Act will appoint a Seven Member National Betting Authority which basically:
– Publishes Regulations and Guidelines for the better implementation of the Law
– Controls and monitors holders of betting licenses so that they will comply with the Law
– Examines applications and issues licenses for bets and premises
– Issues court orders to close down illegal premises
– Collects the levy of licensed bets
In Part III of the Act there are several general provisions, the main ones of which are:
– Betting services are provided only by licensed persons. There are three types of betting licenses.
a) Recipient of Class A license, where services are provided for the performance of bets in licensed premises (Class B betting services and horse racing betting are exempted.
b) Recipient of Class B license, where services are provided for the performance of electronic betting. Slot machines of limited benefit, gambling, casinos provided online and electronic horse racing bets are exempted.
c) Authorized Representative of Recipient of Class A license where services are provided for the performance of bets on behalf of the recipient of Class A within licensed premises except Licensed Class B betting services and horse racing bets.
Applications for the issue of licenses must be submitted with the following details in relation to the applicant if it’s a natural person (over the age of 25) or the beneficial owner of shares or officer if a legal person.
– Regulations for provision of betting services
– Financial information
– Other activities of the applicant
– Criminal record
– Other documents that the Authority may deem useful.
The Authority shall either approve the application, and if so notifies the applicant immediately, or reject it and justifies its decision fully. The issuance, suspension, cancellation or imposition of new conditions are notified by the Authority to banks and are also published.
It is important to note the fact that all three types of licenses are not transferrable or assignable to another person.
Licensed legal entities require the approval of the Authority before another beneficiary gains a significant interest, or takes part in the changing of the Board of Directors or Officers of another Licensee, or signs an agreement for collection of percentages from the income or profit of another Licensee.
The Authority has the right under such conditions specified in the Act, to suspend the license for a period of up to 6 months or revoke the license.
The period of validity of the licenses are for one or two years and may be renewed by a process defined in the Act. The Authority keeps a relevant register of Licensees for this purpose.
Until the issuing of Regulations the fee paid to the Authority is defined as follows:
– For a License of Class A or B receiver valid for one year to €30,000 and for two years to €45,000
– For a License to an authorized representative valid for one year €2,000 and for two years €3,000
The fee is payable with the initial application or application for renewal and in case of rejection the fee is returned reduced by 25%.
Next the Act (Chapter B) refers to provisions relating to the Recipient of Class A or B License.
A request for a Recipient of Class A or B license shall only be submitted by a company with shares which was registered either in Cyprus or abroad and which has an overseas company in Cyprus and whose principal activity is the carrying out of bets. The issued and paid share capital must be at least €500,000.
The application for a Recipient of Class A or B license must be accompanied by a bank guarantee of a bank in Cyprus or member of the EU for the amount of €550,000 which expires 6 months after receiving the requested license.
The applicant for a Recipient of Class A or B license shall in addition to the application, submit data and information concerning the requirement for the establishment in the territory of Cyprus, of a backup server, which will be connected in parallel with the central server where data and information specified by the Authority will be inputted in real-time.
In Chapter C of the Act there are provisions for the license of the Authorized Representative.
Application for a license for an authorized representative may be submitted by any individual or company with shares which was registered in Cyprus and whose principal activity is the carrying out of bets on the part of and on behalf of a Recipient of Class A license.
It is understood that the license of an authorized representative shall seize to be valid automatically if the license of the Recipient of Class A is revoked or suspended on behalf of and on part of who the authorized representative carries out the bet.
An authorized representative is required to provide the Authority with a written agreement between himself and the Recipient of Class A license.
In Part IV of the Act there are regulations – provisions in relation to the process and conditions of the issuance by the Authority of the license for the premises for the provision of betting services of Class A, by a licensed Class
A Recipient or an Authorized Representative. The Authority shall issue, suspend or revoke the premises’ license when there is a breach of the terms of issue or breach of statutory provisions. The transfer of the premises license is only permitted between licensed Class A Recipients or between licensed Authorized Representatives.
Furthermore the Act (Part V) regulates the conduct of the performance of bets with a betting slip – Class A:
The carrying out or acceptance of Class A bets is only performed with an approved computer betting slip marking system, which is issued and administered by a licensed Class A Recipient, the type of which is approved by the Authority.
A Class A License Recipient is obliged to keep betting slips and any other relevant information relating to the provision of betting services for a period of 5 years and their destruction after the 5 year period is only carried out after the approval of the Authority.
From the provisions of the Law it seems that for this betting category the Authority places importance and crucial significance to the type of computer betting slip marking system.
In the next section of the Act (Part VI) the performance of electronic betting – Class B is regulated.
Only a person who is registered as a player and keeps a relevant account has the right of participation in electronic betting. The Class B License Recipient only allows players to participate in electronic betting and not any person. The violation of the law on this point has serious criminal consequences.
A Class B License Recipient may register as a player a person who submits an application for registration.
The application is submitted electronically and includes various personal information of the player.
It is understood that the player must be over 18 years old and has been informed of the conditions and the procedure for carrying out bets, including the fee which may be payable to the Class B License Recipient.
The Class B License Recipient maintains in electronic form a secure list of all players registered with their details as well as an account regarding each registered player in which the amounts received by the Class B license Recipient from the player as well as the amounts due from the Class B license Recipient to the player are credited.
The account is maintained for 5 years after the last transaction and closes with the approval of the Authority.
The carrying out of Class B betting is only allowed with the use of credit cards, debit cards, electronic transfer and electronic money.
Cash is explicitly not allowed nor is credit to players.
The amounts paid to players are only deposited in the bank account from which the amounts used for the bet to take place derived.
If a player is missing who is owed money, such money is paid to the Authority.
The Class B License Recipient is obliged to maintain at a bank a specific clients’ bank account separate from his own. If in such account a deficit is observed the Licensee is required to replace it within 3 days from the end of the month in which the deficit was created.
The Class B License Recipient is obliged to maintain a website related to the electronic betting services provided. The minimum data and information required to be included in the website are referred to in Article 63 of the Act. The Internet address must end in “.com.cy” and also the internet service providers are required to implement a barring system which prevents access to users – clients from non licensed Class B Recipients.
Furthermore Part VII of the Act states that Recipients of Class A or B license must submit to the Authority, annual accounts for the previous year no later than June 30th. The accounts must be audited by a certified accountant and must have been prepared in accordance with international and European standards.
In Part VIII of the Act the tax on bets is regulated.
Every Recipient of Class A or B license shall pay to the Republic of Cyprus betting tax and contribution to the Authority, in respect of bets made by them and their authorized representatives.
The betting tax for each accounting period is 10% of the net earnings from betting of a Class A or B license Recipient for the respective accounting period.
The amount paid to the Authority as a contribution is 3% of net earnings for each accounting period.
It is clarified that an accounting period for the purposes of this Act is each calendar month, and the net earnings equal to the total amounts paid to the Licensee, minus the total amounts paid by the Licensee as winnings to the players in the particular period, regardless of when bets were made or decided.
In Part IX of the Act the offenses and penalties are specified where there is a breach of the provisions of the Act.
The sentence can reach up to 5 years imprisonment and a fine of € 300,000.
In this Part of the Act it is clearly stated that the possession or operation or provision of services of slot machines of limited benefit is prohibited.
It also explicitly states that on line casinos (online roulette, poker, etc.) are prohibited and especially the possession or operation of such machines.
It is also prohibited to conduct betting through betting exchange.
Furthermore, collapsible betting is prohibited, i.e bets where the profit and cost of which are not known at the time of taking place or are dependent on the deviated result of a horserace, contest, match or other event or are depended on the extent of such deviation.
Also prohibited is betting related to greyhound (dog racing).
It is important that the Act prohibiting slot machines interprets what such a machine means and it defines that it is the poker type machines or similar game with cards or other variations or representations, horseracing machines or machines with road racing or speed racing, such as dogs, cars or other, machines known “fruit machines” or with similar or other representations or shapes or numbers or letters or money, bingo machines or other machines which at the discretion of the Authority come within the meaning of ‘slot machine’.
In the contrary, Article 2 explicitly interpreting the word “bet”, the Act allows each bet made on sporting or other events (eg football, basketball, etc.) from a number of individuals who participate in it, provided that each player’s winnings are determined by the person who organizes the bet, before or at the time of carrying it out, with reference both to the amount each player paid to participate in the bet, and the specified final performance of that specific bet.
An “Athletic event” under the Act, and for which betting is allowed, is any sport that is conducted by individuals and for which physical strength and use of skill are required.
Therefore, these kinds of bets are either allowed in the form of a betting slip (Class A) or electronically (Class B).
In Class A horserace bets are allowed with a betting slip but are banned in the electronic form and are not allowed in Class B.
With the above we believe that we have listed the most basic provisions of this new legislation.
Do not hesitate to contact us for any further information or clarifications needed.