Peru: Congress approves major amendments to the Remote Gaming and Sports Betting Law

On Thursday, May 25, the Peruvian Congress approved with 105 votes in favor the text which modifies Law 31.557, which regulates the operation of remote gaming and sports betting, to ensure a greater tax collection; and with 103 votes in favor, the National Representation subsequently exempted from the second vote the substitute text of Bill 3.595.

Although the regulation requires a detailed analysis, which was done in part exclusively for Yogonet by the gaming lawyer Carlos Fonseca Sarmiento, it can be highlighted that among the main characteristics approved, the Plenary of the Congress approved that the companies constituted abroad that operate in the country online games or online sports betting, are taxpayers.

According to the current Law No. 31,557 -approved in July 2022- any online gambling company wishing to obtain an operating license must have a Peruvian domicile or establish a physical branch if it is a foreign company, leaving those not domiciled in the country without a clear regulation.

This raised questions from the National Gaming Society (Sonaja) due to the fact that its members -companies incorporated in the country- are taxed with a 12% tax rate on their operations.

With the approved change, the tax field would be leveled. However, the Ministry of Economy and Finance (MEF) believed that the modification approved last night by Congress could contravene the international commitments assumed by the Peruvian State with the Organization for Economic Cooperation and Development (OECD). "The agreement with the OECD indicates that no newly enacted digital services taxes or other similar relevant measures will be imposed on any company not domiciled in Peru as of October 8, 2021, and until December 31, 2023."

However, for the Congressional Economic Commission, which approved and brought the initiative to the Plenary, the tax on Remote Gaming and Sports Betting applies to the activity and is not a tax on income generated by companies.

#PlenoDelCongreso l Se sustentó el Proyecto de Ley 3595, que propone modificar la Ley 31557, Ley que regula la explotación de los juegos a distancia y apuestas deportivas a distancia, para precisar conceptos y sus alcances.

📑 https://t.co/HBPzya4da5 pic.twitter.com/nlfwKdSyVX

— Congreso del Perú 🇵🇪 (@congresoperu) May 26, 2023

The bill, which will be evaluated by the Executive Power, modifies, among others, article 7 on authorizations for the operation of technological platforms.  The bill says that the operation of the technological platform of remote gaming or remote sports betting, as the case may be, must be carried out through the use of the domain with the extension ".bet.pe", ".bet", ".com", ".pe" or ".com.pe" obtained from a public or private entity or organization responsible for granting the domains with the extensions referred to above, provided that they have the corresponding authorizations granted by the Ministry of Foreign Trade and Tourism (Mincetur).

The Commission also considered that the so-called gaming rooms, in practice, are usually bodegas, minimarkets, apothecaries, bakeries, and a varied universe of micro and small businesses that serve the public. In this line, it included a complementary provision so that such premises, which are in operation without express operating authorization granted by the Mincetur, are exempted from the prohibition established in numeral 29.1 of the Law; that is, they may be located less than 150 meters, following the minimum pedestrian route, from educational centers where regular basic education is provided, as well as temples.

"The remote sports betting gaming rooms that, as of the date when the Law becomes effective, are in operation without express operating authorization granted by the Mincetur, are exempted from the prohibition established in numeral 29.1 of article 29. Notwithstanding, the other requirements established in the Law and the Regulation for obtaining the corresponding operating authorization are applicable", the initiative states.

Another change is given in the cost of the online license, which is tripled and will go from UIT200 to UIT600 (which at current values represents about $740,000). The text eliminates, in parallel, the retail license: this means that betting agencies and points of sale will not pay the guarantee of UIT5 (more than $6,000).

It is also established that the registration of players will be mandatory so that the operation of anonymous betting will no longer be enabled, and the crime of illegal exploitation of sports betting games and online games will be incorporated into the Criminal Code, with a prison sentence of one to four years, in addition to establishing heavy fines and the prohibition of those who do not comply with the Law to carry out the activity.

Finally, the time for the enforcement of the law is extended, once the technical regulations have been approved, from 60 to 120 days, a time that seems quite short to normalize the situation of all those companies currently operating in the country. Based on evaluations of the sector, it is estimated that the regulation will become fully effective in January 2024.