What Online Casino Operators Should Know Before Entering International Markets15 february 2020
2.1. The Tax Burden
Eventually, any gambling project is faced with the issue of business scale expansion. The most logical option in this situation is to enter the international arena. This approach will provide an influx of solvent audiences, attract wealthy investors, and bring good profits.
What online casino operators should know before entering international markets? The first thing is to explore the popularity of the gaming industry in a specific country. It is no secret that the gambling business is prohibited in some states at the legislative level. At the same time, games of chance are absolutely legal in many other jurisdictions.
Depending on loyalty to the iGaming sphere, all regions can be divided into several categories:
- States where gaming is completely prohibited. This category includes the Middle East, China, the United States, and such attractive tourist countries as Indonesia and Thailand. However, land-based casinos are legalized in the USA and China, but their localization is strictly limited to special zones (for example, Macau and Las Vegas).
- Countries where the game industry is partially allowed. A good example is Belarus.
- States with legalized gaming activities. This segment consists of the European, African, and American continents, as well as some offshore jurisdictions.
Companies that decided to work in the international legal field should focus on the third category.
It is crucial to consider the segmentation of popular entertainments, depending on the specific country. For example, team sports betting is in high demand in South America. Central and Eastern Europe are equally loyal to poker, betting, and online gambling clubs. When planning a casino entry to foreign markets, it is worth remembering about these nuances.
When the operator has understood in which direction he or she needs to move, it is time to calculate the estimated costs of the project. The casino entry to foreign markets is always associated with financial expenses. Nevertheless, prices may vary depending on the country selected.
The main items of expenditure are as follows:
- Registration of the company. Most regulatory commissions issue permits only to legal entities registered in their country. The opening of a subsidiary of an existing firm registered in your state can be an alternative in this case, but be prepared to spend a lot of money for this procedure. For example, the cost of registering an online casino in Malta is €15 thousand.
- Opening a commercial account in a local bank. The situation is similar to the previous point. Regulators require a local bank account, even if you were cooperating at an international financial institution previously. In Kahnawake (a famous offshore zone), such a service will cost $1.9 thousand.
- Hosting services. Casino entry to foreign markets implies renting or buying a server located in the territory of the desired country. This is one of the main conditions for obtaining permission in many jurisdictions. The server must be reliable and secure. Moreover, it should have sufficient technical capabilities. For example, renting a monthly fee may take up to 2% of the platform’s income in the Philippines.
- Licensing. This expense item consists of an annual permit fee and a one-time registration payment. Their sizes are regulated individually. They depend on the chosen jurisdiction. Regulators from Costa Rica are requesting $15 thousand for the permit itself and $1.5 thousand more as an initial fee. On the Isle of Man, the cost of licensing is £35 thousand. The counterparty pays the remaining £5 thousand at the time of application submission.
- Additional auditing. It is carried out by some regulators to confirm the quality, reliability, and safety of the platform. There are some types of audits: compliance audit (Malta — €6.1 thousand), audits of each key person (Kahnawake — $5 thousand), mandatory testing of the system (Kahnawake — $15 thousand).
When creating a business plan, it is also essential to consider the taxation principles. The advantage of launching a gaming project in offshore zones lies in reduced rates. In total, enterprises pay to local budgets no more than 5% of annual income. Besides, cooperative taxes and property charges are not applicable here.
Speaking of European states, the tax burden is 18-42% (depending on the specific territory). This region has very few benefits. The EU Governments consider iGaming a highly profitable industry that does not need additional preferences from the authorities.
The entry of the casino into foreign markets implies that the parent company has some experience, as well as the material and technical base. Such platforms have many advantages over newcomers, as many processes are already established and launched.
When expanding the scope of your business, it is important to remember the costs in the following areas:
- Website development. The platform should operate only in a specific domain zone. If the entrepreneur has an operating online casino, then it is advisable to save the design and structure of the previous service in a new solution.
- Promotion. The marketing strategy should be focused on the specifics and preferences of the player. To do this, you can use SEO optimization, affiliate marketing, mailouts, and other techniques to search for your target audience and retain it. It is also essential to interact with high rollers, professional gamers who will provide your casino with a decent income, and excellent advertising.
- Slot integration. For sure, software providers will want to sign new partnership agreements, as the business will operate in a completely new environment. As for the assortment, 70% of gaming solutions can be represented by well-known video slots that are appreciated by many gamblers. The remaining 30% should be distributed between the new products, because, as a rule, users prefer to play interesting and new slot machines.
- Payment modules. It is important to focus on those tools that are popular in the selected region. As a rule, these are Visa and MasterCard, and some other local systems for depositing and withdrawing.
Business scale expansion may take a lot of your time and money, especially if the project is entering the international gambling arena. Such a procedure will require re-registration of the company, hosting rental, and bank accounts opening. Do not forget about such an expensive process as licensing. It is very costly in any jurisdiction.
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