ROMANIA
is that the level of guarantee may reach several million euros (depending on the operator’s revenue). And, from the start of January 2025, any operator licensed to offer both casino and betting products must have in place a guarantee against non- payment of its tax duties totalling €7,000,000 (yes, we double checked the zeros, that’s seven million euros, 35 times higher than the previous requirement). Romanian lawmakers did not only increase the guarantee amount, but also introduced a new method to comply with this requirement. Prior to October 2023, the law allowed two alternatives for fulfilling the guarantee obligation: either by depositing the necessary amount into a special treasury account opened with the Romanian authorities, or by procuring a bank guarantee letter. A third, new alternative is for operators to secure an insurance policy issued by a duly licensed insurance provider from EU/EEA/Switzerland. Leaving €7,000,000 on permanent deposit is a significant financial burden in the context of Romanian operations, so the innovative aspect of this recent legislation, the introduction of an insurance policy option is definitely worth analyzing in more detail. Characteristics of Insurance policies for gambling operators in a taxation context The insurance policy designed to cover a tax-related risk has several unique characteristics that differentiate it from standard insurance products. Understanding these features is crucial for both operators and insurers: Nature of the Risk Insured The insurance policy covers a very specific risk associated with the gambling industry: that an operator is unable to meet its tax obligations towards the Romanian State Budget. This nature of the risk is unusual because certain gambling taxes must be paid by a licensed operator in advance (meaning there is no risk to be insured), while the recurrent GGR tax has to be calculated and paid based on the revenues already obtained by the operator (so the risk of non-payment should not, in
theory, be material since, by design, the operator should have sufficient liquidity). In other words, since the taxation system has been created to protect its creditor (the Romanian State), the risk covered by the insurance policy should theoretically occur only in limited scenarios which entail either gross negligence by the operator or the deliberate intention not to pay the taxes due.
Premium Calculation
The premium for such an insurance policy would normally be determined based on several factors, including the operator’s financial health, the scale of its operations in Romania, historical compliance with the tax regulations, and overall risk profile. It is important to note that the insurance is designed strictly to cover tax liabilities, not the overall compliance of the operator with gambling legislation. By this logic, the scale of operations might be the most important factor for calculating the premium. An operator with a limited market share could have an aggregate tax liability during a one-year period significantly below €7,000,000 (and this would naturally justify a lower premium). On the other hand, by looking at the publicly available data, the operators with the largest market share in Romania have a tax liability of several million euros every month. In these cases the risk profile is naturally higher as the activation of any insurance policy by the Romanian authorities would be for a significantly greater liability. It is clear that insurance policies designed to protect the Romanian State from non-payment of taxes by the gambling industry cannot be “one-size-fits-all”. The reality is a very complex financial product which must be thoroughly tailored to every individual case.
Policy Conditions
Any insurance policy will most likely include specific conditions that operators must meet to maintain coverage. These conditions could involve regular financial reporting, compliance audits, and strict adherence to the legal deadlines for payment of the tax duties. Furthermore, since in most
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IMGL MAGAZINE | SEPTEMBER 2024
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