The approval and enactment of the Law that regulates the exploitation of remote gaming and sports betting in Peru is, without a doubt, very good news. First, on July 15th, the Congress of the Republic, with a majority vote, approved the project. Meanwhile, on Friday, August 12th, President Pedro Castillo signed Law No. 31557 that formalized and promulgated this text. From 2018 until now, three presidents and three Congresses passed without results being achieved in this regard. The General Directorate of Casino Games and Slot Machines of the Ministry of Foreign Trade and Tourism (MINCETUR) had formally presented the initiative for the regulatory project. It took four years for this achievement to materialize, thanks to the joint work and consensus between the Legislative and Executive Branches for the benefit of the country and its whole gaming industry.
This Law consists of 63 articles that, in my opinion, provide a legal, administrative and tax framework that favors and encourages the development of the Peruvian gaming market and investment of multinational companies. The Law has established MINCETUR as the regulator of the activity, with the General Directorate of Casino Games and Slot Machines being in charge of executing this role.
ANALYSIS OF THE MAIN ARTICLES
In my consideration, online gambling in Peru will be stimulated because, in Article 7, reference is made to the Authorization for the Exploitation of Technological Platforms both for companies incorporated in the country and for those foreign firms domiciled abroad. Likewise, in Chapter X, in the articles on the obligation to pay taxes, the complementary and modifying provisions, the origin of the obligation and the subjects of the tax, as well as in Chapter IV, on the methods of control and payment, it is understood that the payment obligation begins from the moment the first betting ticket is sold. In this sense, and knowing the good level of professionalism and control of the Peruvian tax agency (SUNAT), it is difficult to think that any company can avoid paying taxes (operating rights and taxes such as income), because they will be providing a technological service within the Peruvian territory. On the other hand, I think that, in the event of any tax gap, it would be corrected through a Supreme Decree of that agency. Likewise, I anticipate that this point will be detailed in the Technical Regulation that the regulator has to define and present in the next four months. Finally, in this tax subject, the tax agency has sufficient powers to issue the rules and complementary provisions.
Article 8 mentions the Authorization and Registration (Homologation) to which technological platforms, games, progressive systems, all game components, payment method gateways, among others, must submit. According to this Law, it is evident that, in the process of requesting exploitation authorizations, each company will be subjected to rigorous due diligence, KYC and AML processes in accordance with the laws for the prevention of money laundering and financing of terrorism in force in the country, with the participation of the Financial Intelligence Unit (FIU) and the Superintendence of Banking and Insurance (SBS). After passing this procedure, companies will obtain authorization (online license) for a six years period. At the same time, they must pay a guarantee equivalent to 200 UIT (Tax Units; 1 UIT = S/ 4,600), which is equivalent to USD 240,000. This can be presented through a letter of guarantee, bank deposit or a surety policy, and must be renewed every year for the period of the authorization.
The authorization also includes land-based betting agencies (retail channel), which may be related to the same online license holder or to another legal entity. The Law has established the payment by each betting agency of a guarantee of 5 UIT (about USD 6,000). In the same way as the online license, this can be presented through a letter of guarantee, bank deposit or a surety policy, and must be renewed every year for the period of the authorization. I believe this is the main point that has created some discomfort and opposition to the Law, since it could demand a huge invest for some local companies, taking into account that the total budget for the payment of this guarantee is based on the number of agencies that are defined to stay working in the market. However, in this new scenario, a restructuring of the business plan and the commercial strategy of each operation will be necessary to focus on further developing the online channel in the coming years, maintaining a strategic presence of the retail channel in the country.
The Law also includes certification laboratories, which, in addition to going through the registration and accreditation processes with the regulator, must pay a guarantee of 100 UIT (USD 120,000), which must be renewed each year.
TAXES, TECHNOLOGY AND USERS
As for the tax for exploitation rights, the Law has set it at 12% per month on the net win. At the same time, a 2% deductible expense is considered for technological maintenance of the platforms. The payment of this monthly tax by companies operating within the country is considered a deductible expense for purposes of calculating the annual income tax payment. The regulator and related Government institutions, such as the tax agency (SUNAT), the Financial Intelligence Unit (FIU), the Superintendence of Banking and Insurance (SBS), the National Institute for the Defense and Protection of Property Intellectual (INDECOPI) and the National Police, will develop a joint role of supervision of the activity according to the competences of their functions and what is established in this Law.
For example, the Law states that, as part of the tax control and audit functions, the tax agency (SUNAT) must have access to players’ databases and transaction records of each operator. Within its powers, the regulator must proceed to block and report to the competent authority all platforms and applications that are not authorized and continue to operate illegally when this legislation comes into force.
In relation to technological aspects, the Law has determined that the hosting, servers and databases may be located in appropriate computing centers and in accordance with the standards established for them within the country or abroad. The operator must guarantee and provide the required access for the supervisory and audit functions of the regulator and the tax agency.
On the client side, the Law has established that there will be no more anonymous players or bets, so each operator, through the platforms, must formally comply with the registration and identification of players who prove to be of legal age. It will also be necessary to define whether they are Peruvians or foreigners, the payment methods they use, the types and amounts of bets played, the prizes and other factors. Likewise, the text indicates that the payment methods to be used will be all those allowed by the Law (cash, debit and credit cards, bank transfers and others), with the exception of cryptocurrencies, which are prohibited.
TIME FOR TECHNICAL REGULATION
The regulator still has on its agenda to prepare and present the Technical Regulation of this Law, which must be approved and published through the official newspaper ‘El Peruano’ within a maximum period of four months from the signing of the Law by the President of the Republic. At this stage, I suggest to the Government and the regulator MINCETUR that they convene companies, businessmen and specialized consultants in the country and abroad to offer their opinions and contributions, which will facilitate the elaboration of a very complete technical document.
Two months after the approval of the Technical Regulation, the Law will enter into force. According to the established deadlines, this would be in March 2023. From then on, the Peruvian State will receive the tax income from exploitation rights of this activity and will distribute them as follows: 20% of the income will go to the Public Treasury; another 20% will be transferred to the Ministry of Health for the Mental Health program; 40% will correspond to the MINCETUR (of this amount, 25% will be used for activity control and oversight tasks, and 75% will be dedicated for tourism promotion and development), while the remaining 20% will be transferred to the Peruvian Sports Institute (IPD) for the diffusion of the sport at a national level. According to Government estimations, thanks to the regulation of online gambling, the State will collect about 160 million soles (USD 40 million) annually, an important amount. Based on my experience, analysis and knowledge of the development potential of the Peruvian iGaming market, I understand that collection number could be higher year over year, thanks to the maturation of this market and the entry of new operators. As a comparison, we have the records of the first stages of growth of the Colombian online gaming market, as well as the beginnings of the market of the City of Buenos Aires, in Argentina.
There is a long way to go. Even so, I insist that it is fundamental for Peru to have been able to take this great first step. I am optimistic and will permanently monitor the evolution of the Peruvian online gaming market with the willingness to offer my contribution to the sector, accompanying the regulator and local and international companies in the development of their businesses in this finally regulated market.