President Shavkat Mirziyoyev signed a decree introducing changes to regulation of lottery and risk-based gaming activities in Uzbekistan on 19 April. The document abolishes the ban on activities related to organization of risk-based online-games and betting effective 1 January 2025.
The issue of legalizing betting activities has been a longstanding topic in Uzbekistan. In December 2019, the president signed a decree legalizing betting shops, but this decision was reconsidered in April 2022. In April 2023, the head of state directed a return to the development of a regulatory framework for betting activities.
Gazeta.uz inquired a comment from the National Agency of Perspective Projects (NAPP), designated as the authorized state body for regulating and licensing activities in this sphere.
“Bans are practically ineffective”
NAPP noted that the active adoption of digital technologies and electronic payments across all spheres in Uzbekistan has contributed, among other things, to proliferation of risk-based online gambling.
Since September 1, 2007, there have been bans on organizing and conducting gambling and other risk-based games in the country. “However, with citizen’s steady interest in gambling, these bans are practically ineffective, and the population actively utilizes foreign and illegal services,” the agency stated.
“The lack of legal regulation, including restrictions on participation and bet size, leads to citizens participating in games on foreign platforms, losing large sums of money. To continue, [individuals] are ready to borrow large sums of money or resort to illegal actions, theft, robbery and so on,” shared NAPP.
The current situation, amidst citizens' steady interest in the gambling business practically leads to:
- Outflow of foreign currency funds from the country as citizens engage in gambling on foreign online platforms. Estimates suggest that the amount of funds sent by citizens for gambling purposes ranges from $350 million to $1 billion;
- Lack of mechanisms to prevent citizens with excessive gambling addictions from participating in gambling;
- Risks of fraud targeting citizens involved in illegal gambling.
The presidential decree was developed “to introduce advanced foreign experience and modern technologies in regulating activities in the organization of risk games and lotteries, to further increase the investment appeal, tourism prospects of the country, and to attract additional funds,” the agency said.
What measures does decree enact?
1. Establishment of legal frameworks for the legalization of Internet-based risk games, bookmaking activities, and improvement of lottery organization activities.
The decree mandates the abolition of the ban from 1 January 2025, and the introduction of a procedure for legally regulating online risk games and betting activities.
It establishes that these activities, and lottery organization, require licenses issued by NAPP.
The government is tasked with determining the procedure for organizing activities to organize Internet-based gaming, betting activities, and lotteries, including licensing terms and conditions, as well as the establishment and maintenance of the Unified State Register of Players and Bettors. Its primary function will be to monitor the inputs, provide organizers with lists of prohibited participants, and other related matters.
2. Introduction of mechanisms to protect citizens' rights and interests, as well as preventing and combating gambling addiction.
The decree imposes participation restrictions on risk-based games. Specifically, only individuals aged 18 and above, whether residents or non-residents of Uzbekistan, are permitted to engage in betting, online games, and lotteries organized under issued licenses.
Moreover, in collaboration with relevant ministries and agencies, NAPP will devise a decision outlining additional participation restrictions for betting, online gaming, and lotteries. This initiative aims to introduce restrictive measures for socially vulnerable populations, civil servants, individuals with excessive gambling tendencies, and other vulnerable groups, https://www.gazeta.uz/ru/2024/04/26/bookmakers/
3. Generation of additional state budget revenues, preventing citizens' involvement in illegal gambling and foreign currency outflows.
An examination of foreign practices regarding the taxation of gaming organizers revealed challenges in determining profit amounts and significant risks of abuse in calculation due to activity-specific nuances. Additionally, the NAACP reported disparities in tax metrics among various game types, rendering the application of standard tax systems (VAT and income tax) impractical.
The utilization of distributed ledger technology will ensure the integrity of player, bet, and winnings databases, thereby preventing efforts to conceal taxable revenue, the agency asserts.
Starting 1 January 2025, a taxation framework will be implemented for licensed entities. Under this system, online gaming, betting, and lottery organizers will be subject to a 4% turnover tax based on total income, net of all winnings and returned bets.
Consequently, based on preliminary calculations, additional tax revenues to the budget are projected to reach approximately $6 million annually.
This taxation procedure will be implemented for a five-year period, during which the dynamics of game organizers will be examined. Furthermore, the potential introduction of alternative taxation mechanisms will be explored, considering factors such as profitability, viability, and possibility of effective control.
During the same duration, physical persons' income from winnings in licensed online gaming, bookmaker betting, and lotteries will be exempt from personal income tax.
“This measure is aimed at preventing citizens from concealing winnings, encouraging them to participate in legally organized games, preventing their participation in underground and foreign platforms and the outflow of foreign currency funds,” highlighted NAPP.
Conclusion
“The decree’s implementation will establish a reliable foundation for legally regulating the implementation of activities for the organization of online risk games, betting activities, and lotteries. It will introduce effective mechanisms to protect the rights and interests of citizens participating in legally organized games, combat gambling addiction, and provide additional sources of income to the country’s state budget, which can be directed to various social purposes,” concluded NAPP.
