Gambling in Czech Republic and Czech Gambling Act

Czech Gambling Act and legal conditions for gambling business in Czech Republic

Obtaining a license for gambling business in Czech Republic

Under Czech law, gambling business is regulated mainly by the Act No. 186/2016 Coll., on gambling as amended (“Czech Gambling Act” ) - English translation, which defines all important terms and also rules for operating gambling business and regulates offenses and sanctions for such offences in this area.

1. LICENCE FOR OPERATION OF GAMBLING BUSINESS IN CZECH REPUBLIC

1.1 Operator of any gambling business in Czech Republic including online casinos has to meet the general conditions for operation of basic casino/gambling room (i.e. there is no exceptions from the requirements in cases, where only internet games are operated). Operator has to be a legal person, who meets the following conditions:

(i) has registered seat in Czech Republic or in an EU member state or a in a member state of European Economic Area;

(ii) has a clear organizational structure with a transparent and comprehensive definition of competences and decision-making powers;

(iii) has established supervisory board, the board of directors or other similar supervisory body (hereinafter referred to as the "Supervisory Body");

(iv) has registered its basic capital in the minimum amount of EUR 2,000,000;

(v) can prove transparent and safe origin of the registered capital;

(vi) has a transparent ownership structure from which it is clear whom is the real owner according to the law governing the measures against the money laundering and the funding of terrorism (the beneficial owner);

(vii) has all material requirement, human resources and organizational prerequisites necessary for the performance of the activity within the gambling business.

1.2 Such legal entity can apply for a basic license via application form upon submitting:

(i) evidence of fulfilling the requirements set out for the legal entity (as listed in Art. 2.1);

(ii) confirmation no outstanding payments (see Art. 2.3);

(iii) confirmation of non-delinquency and clean penal record (see Art. 2.4); and identification data of the persons whom are subject to such confirmation;

(iv) confirmation of paying the relevant deposit (see Art. 2.5);

(v) evidence of non-existence of liquidation or bankruptcy proceedings of the applicant in the period of the last 3 years;

(vi) evidence, that the operation of gambling business will not cause public nuisance in any way;

(vii) evidence that proper technical equipment and proper operation of gambling business is guaranteed

(viii) list of persons or legal entities of the applicant, specifically (i) a member of the applicant, (ii) a member of the applicant's statutory body, (iii) a member of the applicant's control body, (iv) persons exercising the authority of the procurator and (v) a beneficial owner(s).

(ix) game plan;

(x) expert assessment and operability certificate;

(xi) evidence of server location.

1.3 Confirmation of no outstanding payments is documents proving that there are no outstanding payments:

(i) with the bodies of the Financial Administration of the Czech Republic and with the Customs Administration of the Czech Republic, with the exception of arrears for which the payment of its payment or the distribution of its payment in installments is allowed,

(ii) on payments and penalties for public health insurance;

(iii) in respect of insurance payments and penalties for social security and the contribution to the state employment policy, with the exception of arrears for which repayment has been authorized, and is not in arrears with the repayment of the installments;

(iv) in payments similar to those referred to in points (a) to (c), in the State in which that person has his registered office, place of business or residence or in the State in which he has resided and worked for more than 3 months in the last 5 years before the date application for a permit.

Such confirmation is required from

(a) the applicant,

(b) a person who is a member of the statutory body of the applicant and, if the member is a legal person, also a natural person representing it in this body,

(c) a person who is a member of the control body of the applicant and, if that member is a legal person, also a natural person representing it in that body,

(d) an authorized representative and

(e) a beneficial owner.

1.4 Confirmation of non-delinquency and clean penal record is documents proving that a person has not been convicted of an intentional criminal offense or an economic offense or an offense against property, or if such person is regarded as never been convicted. Such confirmation is required from

(a) the applicant,

(b) a person who is a member of the statutory body of the applicant and, if the member is a legal person, also a natural person representing it in this body,

(c) a person who is a member of the control body of the applicant and, if that member is a legal person, also a natural person representing it in that body,

(d) an authorized representative and

(e) a beneficial owner.

1.5 Deposit of the amount of CZK 30.000.000 or of the amount of CZK 50.000.000 needs to be deposited for each type of operated game. The amount depends solely on the type of operated game. Depositing such amount is obligatory to apply for the basic license. The applicant is obliged to prove the origin of money deposited as such deposit.

1.6 All documents submitted within the application shall not be older than 3 months. Also, all documents are required to be submitted as originals, or as certified copies of originals. In case some documents are not executed in Czech language, certified translation of such document will be requested.

1.7 The application shall be submitted to the Ministry of Finance. The Ministry of Finance define the type of gambling game/games to which the license is issued and sets out conditions of its operation and approved the gaming plan and equipment through which the gambling is to be operated. The fee for applying is CZK 5.000 for one application. The issued license is non-transferrable and it is issued for the maximum period of 6 years.

1.8 Please note, that there is no legal claim for this type of license to be issued in Czech Law, and it is based solely on the administrative discretion of the Ministry of Finance. Even upon fulfilling all above mentioned conditions, there is no way to guarantee the license to be granted. The gambling business is in Czech Republic considered as highly risky, and the Ministry of Finance will examine all submitted documents very carefully.

1.9 Costs of licenses are mainly derived from the amount that needs to be deposited (CZK 30,000,000 for online betting/betting store, and CZK 50,000,000 for casino/online casino). The administrative fee amounts to CZK 5,000. Additional costs might be derived from translation and apostilles on documents, translation of documents and administrative fees for submitting the applications.

1.10 Please note, that in case of casino, the operator is also required to deposit the amount from CZK 10,000,000 for every casino opened by one operator, the minimum of CZK 20,000,000 and maximum of CZK 50,000,000 for all casinos operated by one operator.

2. TAXATION

2.1 The gambling taxpayer is a gambling operator (whether domestic or foreign), both the holder of the basic authorization or the gambling (legal operator) and the gambling operator without a basic permit or a game (illegal operator).

2.2 The final amount of tax is sum of all the partial taxes for individual types of gambling operated by the taxpayer in the given tax period. The sub-base is always determined on the so-called in-out principle, i.e. it is the difference between the received and non-returned deposits, and the winnings paid out for the type of gambling in question. For the purposes of determining the sub-base, only deposits received that are not returned to the players of the game and only actually paid prizes are taken into account. The taxation of gambling operator is set to tax of 23 % for every game, no matter if the games are running online or not. The only exemptions are games defined as technical, which are subject to tax of 35 %.

2.3 The taxations of winning players depend on the type of game in which the player participated. The winning player must state the winning in his tax return form and the winning is subject to the income tax of 15 %. However, if the winning player meets conditions stated below, he doesn’t have to state the winning in his tax return, and the winning is exempt from taxes:

(i) the win was associated with a deposit of his own money and the return on this deposit was not guaranteed; and

(ii) the winning player also earned the win in totally or partially thanks to the coincidence in the game.

3. ADVERTISING

3.1 Online casino can be advertised based on the basic permit and no special payment is required. Advertising of gambling in Czech Republic is possible everywhere, excluding advertising on the outside of buildings and inside of publicly accessible buildings. Nevertheless, advertising via internet is possible, however the content of advertisement is regulated.

3.2 The advertisement shall not create the impression, that gambling is a possible source of stable income, also shall not be targeting persons under 18 years of age or subjects, which are proving to be of interest to persons under the age of 18 and the advertisement must display a notification, that gambling is forbidden for persons under age of 18 and also a warning in the exact wording as it is provided by law: “Ministry of Finance warns: Gambling can cause an addiction!”.

3.3 Those regulations apply for all types and kinds of advertisements. In case of radio advertisement, this warning has to be expressly stated both before, and after the advertisement.

3.4 The advertiser is required to retain a sample (copy) of each advertisement for at least 5 years from the date on which the advertisement was last published. Upon written request, he is obliged to lend free of charge for a period of time a necessary copy of the advertisement to the supervisory authorities. In the event of commencement of administrative proceedings before the expiry of the period of 5 years, the advertiser is obliged to keep a sample (copy) of the advertisement that is the subject of the administrative proceeding until a final decision on the matter. For the same purpose, the advertiser is also obliged to keep information about author/processor of the advertisement, and information about how and where the advertisement was/is used, for the period of 5 years from the date on which the advertisement was last published.

3.5 Advertising gambling business operated without a basic license under the law governing gambling, a fine of up to CZK 2,000,000 may be imposed on a natural person, as an advertiser, sponsor or propagator. A legal person, or a natural person doing business may be fined up to CZK 5,000,000.

3.6 If any legal person or natural person violates the conditions set for the content of an advertisement (as is stated in Art. 4.1 and 4.2 of this memorandum) that is not prohibited, the imposed fine might up to CZK 2,000,000.

4. SUPERVISING AUTHORITIES

4.1 The main authority related to the gambling in Czech Republic is the Ministry of Finance of Czech Republic, as the authority which decides to issue, change or revoke the basic gambling license, administers the gambling information system, maintains a register of individuals excluded from gambling business and maintains a list of illegal on-line gambling platforms, manages the bail, decides on issuing a professional assessment and certification mandate, and supervises the performance of the duties of the authorized person. At the local level, those mandate is transferred to the authorities of the municipalities that decide to issue, change or revoke the permission to place the gaming space, i.e. the gambling house or casino, and are the authorities for accepting all gambling announcements in their municipality.

4.2 Customs offices are competent to try gambling administrative offenses, with the exception of Internet games. In case of the Internet games, the authority to try related administrative offenses remain with the Ministry of Finance.

5. RESPONSIBILITY OF OPERATOR AND POSSIBLE ADMINISTRATIVE FINES

5.1 The casino operator is of course responsible for any violation of law that happened in relation with operation of his/its casino/internet casino under the applicable law. Such violation might be considered as either administrative offence, or in more serious cases of violation as crime offence.

5.2 Administrative offences related to the gambling business are stipulated mainly in Czech Gambling Act and in Act on Money Laundering. Corresponding crime offences covering more serious conduct than administrative offenses are stipulated in Penal Code.

5.3 Administrative fines for natural persons under the Czech Gambling Act might be imposed up to the amount of CZK 1,000,000. Administrative fines for legal persons and natural persons doing business under the Czech Gambling Act might be imposed up to the amount of CZK 50,000,000.

5.4 Penal Code considers running rogue games and betting for a crime with up to two years imprisonment penalty.

6. TECHNICAL REQUIREMENTS

6.1 The requirements for online casinos firstly determine, that the webpages or platform of the online casino has to be available in Czech language, and that the server must be located in the territory of the European Union.

6.2 The operator is also obliged to publish on a website on which the internet game is operated in a legible and at any time accessible way the following information:

(i) the operator's identification and contact details;

(ii) the identification and contact details and designations of the government body which has authorized the gambling, including the authorization number;

(iii) the identification and contact details of the institution dealing with the prevention and treatment of pathological gambling problems;

(iv) a ban on gambling for persons under the age of 18;

(v) a game plan;

(vi) a warning that participation in a game of chance may cause addiction and might be harmful;

(vii) gamble length indicator visible throughout the duration of the game;

(viii) the balance on the user account of a player;

(ix) the highest bet amount, the highest winnings and the highest hourly losses, if the nature of the game allows such.

6.3 The operator is also obliged to notify the player about the offer of use and the state of the set self-limiting measures, after each login to the user account. Every participant of online casino game must be registered, and the operator is obliged to register the participant, whereas the operator is obliged to verify the identity and age of participant.

6.4 There are no limitations for cashless transactions for participants, but deposits or withdrawals in cash are limited to CZK 5,000. It means that funds could be deposit or withdrawal up to CZK 5,000 in 24 hours from user account (Czech Gambling Act - section 79 paragraph 1).

7. OPERATOR’S OBLIGATIONS UNDER THE ACT NO. 253/2008 COLL., ON THE MONEY LAUNDERING (“ACT ON MONEY LAUNDERING”)

7.1 The obligation to identify the client in cases, where the value of the occasional trade exceeds EUR 1,000, or regardless of the trade value in cases of suspicious business and other cases set out by Act on Money Laundering and obligation to control the client.

7.2 The obligation to keep certain data about the client for a period of 10 years from the date of the transaction, or from the termination of the business relationship with the client

7.3 The obligation to report any suspicious business to the Financial Analytical Unit.

7.4 The obligation to establish the so-called internal principles systems and the risk assessment programs, and prepare a report about such systems and programs in written form within the period of 60 days from the day such obligation became relevant.

7.5 The obligation to train employees regularly, at least once in 12 months for such employees who might come into contact with so called suspicious business, i.e. a transaction made in circumstances giving rise to suspicion of attempts to legalize the profits of crime or to suspect that the funds used in trade are intended to finance terrorism, or other facts that might suggest such suspicion.

8. IDENTIFICATION REQUIREMENTS

8.1 The age and identity verification are mostly done via OpenID services, or the player can be asked to provide a copy of ID card, or other official document proving that the player is of age over 18 (of course, the participant can hide all redundant personal data).

9. PAYMENT LIMITATIONS

9.1 The only limitation on cash transactions is limited to CZK 270,000 daily. That applies to both natural persons and legal entities. A breach of this limitation might be a subject to a fine in the amount up to CZK 500,000, and therefore it can be imposed both on the payment provider and on the payee. Cashless transactions are not subject to any restrictions.

9.2 In Czech Republic, it is not possible to deposit nor withdraw winnings through ATMs, but transactions through another company should be possible. We have not found any restrictions on any type of electronic transaction.

9.3 This limitation applies only to payments – in cash payments. If the amount of payment exceeds CZK 270,000, it must be made by cashless transaction (Czech Act No. 254/2004 Sb. on Restriction of Cash Payments - section 4 paragraph 1).

10. BANNED LOCATIONS FOR GAMBLING IN CZECH REPUBLIC

10.1 Gambling must not be operated at school and school facilities, facilities for leisure activities of children and youth, social services facilities, medical facilities providing outpatient, overnight or inpatient care, in the area serving the church or religious society and in the facility of the integrated rescue system.

10.2 In case of bet store, it also cannot be operated in the area serving the public authority.

For more information, contact us at:

JUDr. Mojmír Ježek, Ph.D.

ECOVIS ježek, advokátní kancelář s.r.o.
Betlémské nám. 6
110 00 Praha 1
e-mail: mojmir.jezek@ecovislegal.cz
www.ecovislegal.cz

About ECOVIS ježek advokátní kancelář s.r.o.
The Czech law office in Prague ECOVIS ježek practices mainly in the area of Czech commercial law, Czech real estate law, representation at Czech courts, administrative bodies and arbitration courts, as well as Czech finance and banking law, and provides full-fledged advice in all areas, making it a suitable alternative for clients of international law offices. The international dimension of the Czech legal services provided is ensured through past experience and through co-operation with leading legal offices in most European countries, the US, and other jurisdictions. The Czech lawyers of the ECOVIS ježek team have many years of experience from leading international law offices and tax companies, in providing legal advice to multinational corporations, large Czech companies, but also to medium-sized companies and individual clients. For more information, go to www.ecovislegal.cz/en.