It is again legal to open a casino in Ukraine, but the taxes are high, and it is most likely only a business opportunity for the rich.
It was a milestone when gambling was legalized in Ukraine last year after having been banned since 2009. In February, the state budget received its first license payment from an online casino, and many others are on their way. Still, the costs of running either a physical or online casino in Ukraine are high, limiting its potential.
Victoria Zakrevskaya, a consultant for gambling operators, told Kyiv Post that the costs of running a casino are too high at the moment. It is customary in other countries to either have expensive licenses with low taxes or higher taxes but with cheap licenses. Ukraine had decided to both have high taxes and costly permits, which is unique.
“Ukraine adopted both, which creates an unbearable financial burden on operators at the moment,” Zakrevskaya said to the paper.
A 5-year license cost can range from 23.6 million UAH for an online poker site to 283.4 million UAH for a physical casino in Kyiv. On top of that comes an annual fee of 826,500 UAH per roulette table, 425,000 UAH for non-roulette tables, and 28,300 UAH for a gaming or slot machine. The company SpaceX, the owner of the online casino Cosmolot, which was the first to get a license in Ukraine, will pay 39 million UAH over the next five years.
Many rules to follow
Kyiv Post writes that the Ukrainian gambling fees are the highest in the world. According to the paper, it will cost 10.4 million dollars over five years to run a licensed five-star casino hotel in Kyiv with 150 rooms with an extra payment per game table and slot machine.
Besides the costs of receiving a license, there is also high taxes. Operators will pay an 18 percent income tax and a gambling tax varying from 10 to 28 percent, depending on which kind of gambling it is. It means that total taxes will be from 28 to 46 percent.
Physical gambling is only permitted in five-star hotels in Kyiv, while it is permitted in both four and five-star hotels in other cities around Ukraine. The government has decided to have high license prices and taxes to limit the number of casinos. Ukraine had big problems with money laundering and corruption until it was banned in 2009. Even after the ban in 2009, many smaller casinos continued to operate disguised as lottery places.
Online gambling will be popular
The many potential physical casinos opening in Ukraine are getting a lot of attention in the media, but it looks like online casinos will benefit most. Costs for receiving an online license are lower, as mentioned above, and creates better possibilities.
“It is a common practice for international operators to engage qualified Ukrainian staff to develop new products and maintain existing operations. Due to the unclear regulation of these services, international operators had to rely on a complicated network of outsourcing and outstaffing agreements, combined with Ukrainian-based IT outsourcing companies. Now international operators may seek to establish a separate B2B provider in Ukraine to support their groups’ needs, cutting down their compliance risks and accessing local talents directly,” writes I-Gaming Business.
“Content providers such as live-casino streaming services and games development studios may become a more interesting and reliable party for the clients buying their services by obtaining a local license. Beyond that, foreign investment funds and private equity investors consider licensed studios as better targets for investment and strengthening their portfolios,” the site points out.
Ukrainenu has previously written about the difficulties facing the casino sector in Ukraine, which you can read more about here.