ALDERNEY - YOUR ACCESS TO WORLD MARKETS

eFocusedalderneygambling.com

The Alderney Advantage What makes Alderney a World leader in eGambling regulation? 1 alderneygambling.com PO Box 1015, Alderney, British Channel Islands, United Kingdom GY9 3HT Phone: +44 (0)7990 015888 Email: [email protected]

2 Contents

Introduction 04 Licensing with Alderney 05 Jurisdictions comparison 06 The future of the regulator 07 Tax hurdles 08 Latest developments 10 A closer look 11

3 Introduction

Welcome to our new look eFocused magazine

We’ve found our publication to be the 2. Approachability – The AGCC does perfect channel for sharing all the vital not reside in an ivory tower far out of the information about licensing in Alderney. reach of its licensees. The AGCC is run It is sent out as our very first contact with by very real, approachable individuals, new enquirers so if you are new to the all with many years’ experience of the Alderney regime and all it can offer – industry. Unique to Alderney’s structure, welcome, and thank you for reading! each licensee is appointed a relationship manager at the start of the licensing In this latest issue you’ll find everything journey. The relationship manager will you need to inform your decision be the first port of call for all enquiries, making about eGambling licensing. updates, annual audits and renewals. From the types of licence required They will really understand your business and why you should choose Alderney, and their expertise can be called upon to information about the ways in anytime to assist you to grow and which we’re working to ensure that develop your activities – tailoring their we maintain our position as a world services to your operational requirements. leading online gambling destination. 3. Stability – Alderney forms part of The Alderney Gambling Control the Bailiwick of Guernsey and therefore Commission (AGCC) has been enjoys a unique relationship with the around for many years and most in larger Island. Being neither part of the the industry will recognise it by name. EU or EEA, the jurisdiction remains Spending my time travelling the globe unaffected by Brexit. Alderney offers I’ve been able to speak to hundreds a stable political environment and a of people who know about Alderney, transparent and low tax system with no but interestingly, it’s what they don’t corporate tax, gaming duty or VAT. In its know about us that’s of most interest. latest Moneyval inspection, the AGCC was given a glowing report with hardly So I’d like to open this issue of any recommendations - testament to the eFocused by enlightening readers excellence of its approach to maintaining with some (mostly) unknown truths the highest standards of AML/CFT. about licensing with Alderney: Of course there are far more advantages 1. Flexibility – The AGCC take a risk- to licensing with Alderney and I based approach to the entire process of hope this publication provides you licensing and regulation. This means that with a flavour of what we offer. the level of regulation and administration required can be adjusted according to I’d be delighted to talk to you anytime the risk factor of the business activities about your licensing requirements or even the geographical location of the and the opportunities available business. Applications are assessed on to you. Please feel free to call or a case by case basis. All of this serves to email to start the conversation. ensure that the process is straightforward for all parties involved – minimising Susan O’Leary administrative and regulatory burden Director of eCommerce when a lighter touch can be applied. States of Alderney

No part of this publication may be copied or reproduced without the written permission of the publishers. Opinions expressed in eFocused are not necessarily those of AlderneyGambling. com or Langlois Robertshaw and Delbridge (LRD). AlderneyGambling.com and LRD do not accept responsibility for advertising content. PLEASE NOTE: Whilst every effort has been made by the publishers and their agents to ensure that this magazine is comprehensive and accu- rate, they cannot be held responsible for any errors or omissions, or the results thereof.

04 Licensing with Alderney

Alderney’s world renowned licensing regime

The activity of your business will determine the kind of licence required from Alderney. Our modular approach to regulation has not only simplified the requirements for operators, but has ensured longevity of the regulation in an ever evolving marketplace.

Fundamentally, our licensing regime separates the two distinct functions of eGambling. A Category 1 Licence covers all aspects of player management and the Category 2 Licence covers all aspects of providing the games and betting activities.

Category 1 Licence Core Services Associate Business to Customer Certificate(CSAC)

Registering, verifying and contracting with Providing gambling specific software – the customer and managing player funds. such as games – to an Alderney Licensee. A Core Services Associate Certificate Once player verification has been is required if an operator wishes to completed, the player can be offered provide 3rd party services (gambling activities from either a Category 2 licensed software, player fund deposit, company platform in Alderney, or any other platform management) to an Alderney operator. licensed by a competent authority. Operators are free to build up their own Fees portfolio of games and activities. Alderney is a low tax jurisdiction and only levies a Category 2 Licence modest licence fee as explained here. Fees for a Category 1 (B2C) Licence are based on Business to Business Net Gaming Yield (NGY). However, for the first year a new licensee receives an introductory fee of £17,500. Thereafter, £35,000 p.a. up to £500k NGY. A banded Effecting the gambling transaction fee structure applies up to NGY of £30m. There is a including operational management maximum fee of £400,000 (all activities included). of a gambling platform located in an A Category 2 (B2B) Licence has an introductory fee of approved hosting centre in Alderney or £17,500 in the first 12 months, thereafter fixed at £35,000 Guernsey. per annum regardless of the amount of business transacted over the platform or the number of activities installed on the platform. Any number and type of gambling activity The Category 2 Associate Certificate has an can be approved onto a single Category 2 introductory fee of £35,000 in the first year, thereafter Licence. Alderney has the widest definition £50,000 p.a. of gambling and gaming and can Finally, fees for the Core Services Associate Certificate are £10,000 p.a. approve any activity from the traditional In order to avoid any element of “double taxation” to the contemporary and innovative. following the UK introduction of POC regulation and taxation, the NGY from any UK facing activities is excluded from the calculation of the fee for the Category 2 Associate Certificate Category 1 licensee. Also to minimise any element Business to Business of “double regulation” the AGCC has streamlined its regulation of UK facing activities for those holding a UK (outside of Alderney) Gambling Commission licence.

Effecting the gambling transaction including operational management of a gambling platform located outside of Alderney. This is the foreign based equivalent of a Category 2 Licence.

05 Jurisdictions comparison

How Alderney compares with other jurisdictions

Alderney Isle of Man Gibraltar Malta

Corporate 0% 0% 10% Headline 35%, can be reduced to Tax 5% for non-resident shareholders

VAT 0% 20% 0% 18%

Fees & One licence covers all types One licence covers all types of Separate licence required for each Separate licence required for Gaming of activities activities type of activity, fees and minimum/ each type of activity, fees and Taxes/ maximum taxes apply to each mimimum/maximum taxes apply Duties licence to each licence

Gaming 0% Gambling Duty of 1.5% of Gross Minimum Gaming Duty £85k. Class 1 Casino standalone flat £70k Duty Gaming Yield/Retained Profit up Fixed Odds and Betting Exchanges pa (33% discount applies to first to £20m, 0.5% on the next £20m, 1% of Turnover. Casinos 1% of six months of operation), £12k pa if 0.1% on amount over £40m. 15% Gaming Yield or Gross Profit. hosted on Class 4. Class 2 Sports on pool betting. Relief on Yield/ Maximum Duty £425k  0.5% of Gross Bets. Class 3 Poker 5% Profit from UK market actvities.No  of real income. Class 4 Hosting £46k maximum pa (effective 50% discount over first year) + £12k for every operator hosted who does not hold a Malta licence. Maximum Tax £388k 

Fees

B2C utilising Category 1 Licence, £17.5k first year. Sub Licence £5k pa if exclusively £2k pa per licence £7k pa per licence third-party B2B Thereafter Band A £35k pa up to using IOM licensed B2B platform platforms £0.5m NGY inceasing to £400k otherwise £35k pa for a Full maximum at Band G for NGY Licence above £30m. NGY from UK market actvities excluded from NGY

B2B offering Category 2 Licence, £17.5k first Full Licence £35k pa if not offering £2k pa per licence £7k pa per licence services toB2C year. Thereafter £35k pa plus £3k platform to any clients not holding operators per client not part of same group an IOM licence. Otherwise Network and not holding a Category 1 Licence £50k pa plus £5K pa per Licence. client not holding an IOM licence.

Category 1 & 2 Licences, £35k first Full Licence £35k pa if not offering £2k pa per licence £7k pa per licence B2C with own year thereafter Cat 1 Banding and platform to any clients not holding B2B platform Cat 2 client fees apply resulting an IOM licence. Otherwise Network in minimum of £70k pa and Licence £50k pa plus £5k pa per maximum of £435k fee. client not holding an IOM licence.

n.b. Alderney also offers a No equivalent offered No equivalent offered No equivalent offered Category 2 Associate Certificate at £35k pa for first year, thereafter £50k pa for operators wishing to locate their B2B servers in an AGCC approved data centre in other jurisdictions.

06 The future of the regulator

Taking the reins at the AGCC

Jorn Starck is the Executive Director of the Alderney Gambling Control Commission, having taken over from André Wilsenach at the start of 2016. He reveals the jurisdiction’s latest developments (and achievements) and discusses his plans for the future of the regulator.

Being a regulator first and foremost I have been keen to ensure that there There are still a large number of then a director at the AGCC for five is stability and continuity so I have jurisdictions that haven’t implemented years placed me in good stead to not wanted to change too much; their own online gambling legislation. take the helm at the AGCC and I am my personal style is probably more With our experience we are very enjoying the challenge of the role. analytical and more focused on the confident that Alderney can also legislative and regulatory environment. contribute to the development of the I joined the AGCC just after the industry in those jurisdictions across the jurisdiction had acquired white-listing André wanted to bring in experienced world: Eastern Europe, status in 2007, but my interest in gaming input and skills from other jurisdictions the diverse Asian markets, South dates back long before this time when I and regulators so was very active America and African countries. represented Finland at international level in the International Association of at junior chess competitions and also Gaming Regulators and on the Gaming If possible the regulator should only took part in backgammon tournaments. Regulators European Forum. I hope to monitor from the sidelines and the Spending around eight years working continue the success that André had in industry handles itself responsibly. for international sports books and this area and ensure that the Alderney The challenge for the AGCC will be to also working for a Scandinavian- flag continues to fly internationally. continue to represent the top tier of focused affiliate before joining the online regulation in the new jurisdictions AGCC has given me insight into life Where we are now we associate with but to also continue on the other side of the fence too. We are currently at the stage where the to liaise closely with national regulators regulatory changes are starting to impact as well as remaining relevant and A regulator needs to be very structured on the operators in the industry quite liaising with other jurisdictions. and understand how the industry significantly. In the past few years the operates. You need to be able to industry in Europe has moved towards Jorn Starck analyse licensing structures and Point Of Consumption regulation (POC). Executive Director proposed operating procedures. Alderney Gambling Control Commission National regulators have been given You also need to assess whether these fairly free reign by the European are compliant with the legislative Commission to implement their own framework of the jurisdiction and whether interpretations of the gambling the licensee’s controls meet the industry regulations, therefore compliance standards the landscape has changed. of the AGCC. Offshore jurisdictions will always My predecessor, André Wilsenach, have their role to play but there is who I had the pleasure of working also a need to recognise that the with for a number of years, spent 14 operators need different solutions years building a very high standard for their products and services. of regulatory environment with the help of an experienced team and commissioners and he paved the way for the jurisdiction in this regard.

07 Tax hurdles

Tax shouldn’t be taxing

Irena Nelson, Senior Tax Manager at Grant Thornton, looks at some of the tax hurdles online gambling operators need to clear

The global online gambling industry continues to grow Gaming duties: at a phenomenal rate in emerging and established markets all over the world. But despite this rapid Unlike other jurisdictions, there are no gaming duties in expansion, operators are being squeezed more than place on Alderney, only licensing fees. Take Gibraltar, ever due to tighter regulations and higher taxes. for example. There is a minimum level of gaming Changes to where and how operators pay tax on their duty set at £85,000 per annum which is payable at income has caused serious headaches of late, dealing 1% of turnover for fixed odds and betting exchanges a hammer blow to bottom line and profitability. and 1% of gaming yield or gross profits for casinos. This is payable up to a maximum of £425,000 per But tax doesn’t have to be taxing, and here at Grant annum per licence on top of any licence fees. Thornton we have been helping gambling companies navigate complex global tax systems for many years. We It is worth noting that individual jurisdictions are have the expertise and knowledge to assess changes starting to bring in betting and gaming duties that to legislation and regulation, and understand how to apply where there are local customers, also known achieve the optimal tax position. To do this, operators as a Point of Consumption (PoC) tax. This type of must consider several factors when deciding where to taxation model was introduced in the UK back in base their business, and how they are structured and run. December 2014, and means operators now pay a 15% tax on all bets placed by UK punters regardless The key to success is stability, and despite being a small of where their business is located. The remit of PoC island, Alderney offers solid foundations from which is set to be further extended later this year to tax free companies grow their businesses. Below are three bets offered to punters as an incentive or reward. key areas of taxation to consider, and how operators based on Alderney can take advantage of each. Gambling operators based on Alderney are in a much stronger position to ride the PoC storm than VAT: those located elsewhere. Because Alderney has no gaming duties there is no double taxation; this Under European legislation, betting and gaming is is boosted further since Alderney disapplies any exempt from VAT. While this has its perks, it means net gaming revenues from UK customers when only a limited recovery of VAT can be incurred on calculating the level of licence fees payable. costs. There is no VAT system in place in Alderney, meaning any supplies made to a company Corporation tax: based on the island are outside of its scope. Corporation tax, a word that makes CFOs the world over This leads to a material saving, both in terms of shudder. Depending on where a business is located, cash flow and genuine cost benefit, as VAT normally corporation tax need not be a massive burden. Take applies to most costs incurred. Standard VAT rates Alderney, for example. It is subject to the Bailiwick of vary across the EU; Luxemburg is the lowest at 17% Guernsey’s corporation tax regime which taxes most and Hungary the highest at 27%. While Alderney is companies, including betting and gaming operators, VAT exempt, other EU jurisdictions are now working at a rate of 0%. In comparison, the headline rate of towards introducing a VAT system, or similar sales tax. corporation tax in Malta is 35%, although it’s worth noting that this can be reduced to 5% for non-resident shareholders subject to certain special reliefs.

08 A word of caution:

One of the most important points to consider But the Organisation for Economic Co-operation is that global online gambling companies are and Development has wised up to this and has international by their very nature. For example, it attempted to align transfer pricing outcomes with value is common for groups to list on the UK Alternative creation, recognising the importance of intangibles Investment Market with a UK tax resident holdings in the digital economy. It has emphasised entities company rather than an operating company. will earn economic returns based on the value they create through functions performed, assets used and risks borne in the development and exploitation of intangibles; legal ownership alone will not determine entitlement to reward. This is being done through the Base Erosion Profit Shifting (BEPS) project.

The UK has implemented a new Diverted Profits Tax (DPT) to run alongside BEPS. If a company is party to arrangements with connected entities involving the use of transactions which lack economic substance and are deemed to divert profits from the UK, then 25% DPT will be charged, though there are certain exemptions in place.

The licensing regime in Alderney is powerful and flexible, and largely allows licensees to organise themselves depending on what works for them from a commercial perspective. However, those who commit substantial assets to the Bailiwick of Guernsey and who have genuine economic substance will be at less risk from BEPS and DPT than those with little or no weight behind them.

The global online gambling industry is as large as it is complex, so it’s always worth companies seeking individual tax advice. Tax Authorities worldwide are becoming more and more aware of the global gambling industry and I have found that pre- emptive advice is more important than ever.

Irena Nelson is a Senior Tax Manager at Grant Thornton. She advises across all area of indirect taxation, with a particular specialism in the betting and gaming sector. Irena has more than seven years’ experience in the sector and, as part of this, spent more than two years in the in-house tax function for a FTSE-250 multinational gambling group.

09 Latest developments

Asian Agency Model

The AGCC has created a unique regulatory structure incorporating the agency model for Asian betting markets.

The AGCC recognised that, in a typical Far-Eastern extended social structure, bets on popular sporting events may be placed by just one person on behalf of others and that credit may also be extended by ‘agents’ to linked sub-accounts, where individuals can place their own bets. This activity is fraught with challenges for the gaming companies who wish to operate, and be seen to operate, to the highest regulatory standards.

Working closely with the industry to ensure compliance with internationally acceptable standards - specifically in the area of AML/CFT - and after an in-depth review of Alderney’s FATF compliant regulatory requirements, the AGCC launched the Asian Agency Model. The model has already been adopted by a number of licensees.

This development is another example of our uniquely pragmatic yet innovative approach to regulation that will be of genuine benefit to many operators.

Super Master Agent B2C Licensee (Category 1) Registration, Verification, Fund Management Master + Master Agent 1 Agent(s)

Sub* Sub* Sub* Sub* BETTING B2B Licensee (Category 2) Online Sports Betting Platform

*MA sub accounts (Funded by credit from MA)

Multi-Jurisdictional Testing Framework Developments

The first phase of the International Association of Gambling Isle of Man to assist licensees and certificate holders in Regulator’s (IAGR) working group project to establish a Multi achieving the best speed to market whilst minimising Jurisdictional Testing Framework (MJTF) has been completed. regulatory duplication and games software testing costs.

The MJTF project is an important step towards harmonising The IAGR working group has continued its efforts throughout regulatory requirements across all IAGR jurisdictions and we 2016 and the aim is to complete the second phase - continue to actively work towards further standardisation covering mainly game fairness - before the end of Q1 of games software testing requirements. Working closely 2017. This will likely benefit all Alderney licence holders. with gambling regulators in the UK, Denmark and the

010 A closer look

Alderney under the microscope

Alderney’s latest assessment from The Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval), offered the jurisdiction hardly any recommendations for improvement in eGambling regulation.

The 322-page report contains an analysis of Guernsey’s implementation of International and European standards on money laundering and terrorist financing, as well as a recommended action plan.

With regards to eGambling and the AGCC’s contribution, the report highlights that Alderney’s approach to eCasinos is compliant with the 3rd EU AML/CFT Directive, noting that the AGCC has built and maintained relationships with foreign gambling regulators to highlight and prevent fraudulent operations. To have received this Moneyval stamp of approval affirms the AGCC’s approach in following international best practice.

The high level evaluation really is testament to Alderney’s strength as a jurisdiction and demonstrates how well the Alderney regime is run. Such a The high level evaluation really is respected accolade testament to Alderney’s strength is not awarded to as a jurisdiction and demonstrates every jurisdiction and we are very proud of how well the Alderney regime is run. this recognition. We continue to work with our financial regulator, the Guernsey Financial Services Commission (GFSC) and the Guernsey Financial Intelligence Unit (FIU) to ensure the highest level of protection for players and industry is adhered to.

011 Alderney’s

international.sure.com big advantage, our partners

Alderney’s offering is reinforced by its c5alliance.com/eGaming- alderney-guernsey-jersey partnership with a number of industry experts, dedicated to providing a specialist service to eGambling licensees.

jtglobal.com/egaming

fortgroup.com

bellerivestenham.com

alderneygambling.com PO Box 1015, Alderney, British Channel Islands, United Kingdom GY9 3HT Phone: +44 (0)7990 015888 Email: [email protected]