The development of the digital economy requires that the national regulations are at the same time adjusted to the characteristics of business operations in the digital world and that normative mechanisms are developed that will enable the control of performing of economic activity online.
The legislation in force in the Republic of Croatia did not provide for the possibility for the competent authorities to apply the same measures in the digital world as the ones applied in the real environment, which asked for a normative solution that would harmonize the actions of the competent authorities in the real and digital environments when finding unlawful business operations.
Amendments to the General Tax Act that came into force on 1 January 2019 govern the prevention of performing of unauthorized economic activity online.
In relation to Article 44, paragraph 3 of the General Tax Act, it is stipulated that, if a specific economic activity is provided via the internet while avoiding meeting the requirements regulated by the provisions of a special regulation governing such an activity, thereby achieving unjustified tax advantages or causing damage for the community that is difficult to recover, the competent tax authority may issue an order to ban further business operations.
The Ordinance on the Implementation of the General Tax Act which came into force on 4 May 2019 stipulates in detail in Articles 18 through 21 the procedure of preventing the performing of unauthorized economic activity online referred to in Article 44, paragraph 3 of the General Tax Act.
Under the said provisions of the General Tax Act and the Ordinance on the Implementation of the General Tax Act, the Ministry of Finance, Tax Administration will also prevent unauthorized operation of online gambling which is provided without the authorisation issued in accordance with the Act on Games of Chance.
Market analysis showed more frequent occurrences of operation of online gambling by foreign companies which have not acquired the right to operate such games in the Republic of Croatia in accordance with the Act on Games of Chance (Official Gazette no. 87/09, 35/13, 158/13, 41/14, 143/14 - hereinafter: the Act). In a specific case, foreign online gambling operators, allow Croatian citizens to participate in gambling abroad by avoiding to meet the requirements for acquiring the right to operate gambling in accordance with the Act on Games of Chance.
Performing online activities without an acquired operating right provides unjustified tax advantages to the foreign gambling operators because receipts gained on the Croatian market in this manner are not taxed nor do the foreign operators pay the legally proscribed fees into the state budget.
At the same time, operators who have acquired the right in the Republic of Croatia to operate gambling are obliged to pay high amount of annual and monthly remunerations which, pursuant to Article 8 of the Act, are allocated for funding the development of sports and institutions dealing with culture, extra-institutional education of children and youth, as well as organisations which contribute to the fight against drug abuse and other forms of addictions and aiding the disabled. In other words, unlike operating gambling outside Croatian legislative framework, legal operation of gambling provides a series of benefits to the wider social and economic community.
Furthermore, foreign gambling operators performing this activity without meeting the statutory requirements governing the operation of gambling in the Republic of Croatia are not subject to audit and control by the competent national authorities, and by circumventing the legal requirements they may cause damage for the community that is difficult to recover.
Namely, regulations governing the operation of online gambling forbid the receipt of payment by persons under 18 and prescribe that, when registering, the player is obliged to provide the data on the ID number contained in the personal identification document. The gambling operator is then obliged to run an online verification of the player’s identity thus checking the accuracy of the player’s information as well as verifying whether the player is an adult individual, and this verification is carried out by checking against the data via the Tax Administration electronic services.
The statutory prohibition of receiving payments from persons under 18 and the obligation to verify the accuracy of the player’s identification data during registration procedure are a part of the legislative framework that enables the gambling to be operated in a socially responsible manner with the purpose of preventing the addiction of minors on excessive and compulsive gambling and the protection of community values. By operating online gambling, foreign companies avoid meeting the requirements governed by statutory or regulatory provisions of the Republic of Croatia in relation to operating gambling in a socially responsible manner, thus causing damage for the community that is difficult to recover.
On the other side, companies that have acquired the right to operate gambling in the Republic of Croatia are obliged to ask for an identification number from the player and verify the accuracy of the registration data and the legal age of the player via the electronic services of the Tax Administration, all with the purpose of preventing the minors to participate in gambling as well as taking measures to prevent the development of gambling addiction.
We present below the list of website addresses in relation to which the Ministry of Finance, Tax Administration, issued an order to ban the unauthorized online gambling that will be executed within the deadlines prescribed in Article 19, paragraph 2 of the Ordinance.
We hereby urge the owner/user of the domain with the blocked access to its content to contact the tax authority within 30 days in order to eliminate the reason behind the ban of business operations. The 30-day deadline commences on the fifteenth day from the date of issuance of the listed order.
Operating gambling in the territory of the Republic of Croatia is the right of the Republic of Croatia and such games may be operated pursuant to the Act, the decision of the Government of the Republic of Croatia and the approval of the Ministry of Finance. The Republic of Croatia transfers the right to operate gambling to the Croatian Lottery Ltd. (Hrvatska Lutrija d.o.o.), established by the Republic of Croatia. Casino games, betting games and games on slot machines may be operated by other companies as well as pursuant to the decision of the Government of the Republic of Croatia and the approval of the Ministry of Finance.
The decision on the number of operators which can be granted the right to operate such games is adopted by the Government of the Republic of Croatia, upon the proposal of the Ministry of Finance. In accordance with the decision of the Government of the Republic of Croatia, the Minister of Finance issues a decision on opening a tender for granting the right to operate gambling on slot machines, casino and betting games.