The Gambling Law Review: Latvia

Overview

iDefinitions 1

The definitions concerning the gambling are provided in Article 1 of the Latvian Law on Gambling and Lotteries (the Law). The following gambling activities are permitted in the Republic of Latvia: slot machine games, roulette (cylindrical game), card games, dice games, bets, totaliser, bingo and game of chance on the phone.2

Gambling is defined as a game in which a natural person may acquire a prize fully or partly dependent on chance or previously unknown circumstances, by placing a bet. A game on a gaming machine with a free game as the only prize, as well as a game on a gaming machine with a prize in kind (with the exception of cash prizes) up to €15 are not considered as gambling.

Bingo is a gambling in which the player may acquire a prize by guessing random combinations of numbers from preset combinations of numbers and in which the amount of the prize depends on the drawn or guessed combination of numbers and the total sum of the deposited bets.

A wager is gambling in which a player participates by paying a participation fee (a bet) and by forecasting the likelihood of an event, and in which the amount of the prize depends on the accuracy of the player's forecast, the deposited bet and the coefficient for calculating the prize, specified in the rules of the game.

Interactive gambling is a gambling in which the player may participate by using electronic communication services. Interactive lottery is defined as a lottery on a nationwide scale in which the player may participate by using electronic communication services.

A lottery or raffle is a game that has the nature of an agreement of chance in which the prize acquired by the participant is fully or partially random.

A dice game is gambling in which the prize depends on the rolled dice number and the win rate defined by the game rules and is not equipped with a special electronic programme for controlling the game and determining the amount of the prize.

A card game is gambling in which the prize depends on the dealt cards (combination thereof) and the win rate defined by the game rules and is not equipped with a special electronic programme for controlling the game and determining the amount of the prize.

A card and dice game table is an industrially manufactured table with an equipped place for the dealer, betting boxes for the players and a playing surface.

Roulette (cylindrical game) is gambling in which the prize depends on the combination of numbers, symbols or other signs determined by means of a rotating device, as well as on the deposited bet and the win rate defined by the game rules, and is not equipped with a special electronic programme for controlling the game and determining the amount of the prize.

A roulette, card and dice bonus game is a game derived directly from the gambling rules, which upon the onset of certain conditions ensures additional winning possibilities, excluding any lottery elements.

Betting is defined as gambling in which the player participates by depositing a bet and forecasting the occurrence of a single event or multiple events, the possibility of an event or not happening or anything that may turn out to be true or false and in which the prize depends on the total sum of the deposited bets, the win rate and the results of the forecast. It is prohibited to operate betting for events that have already taken place or events known to one of the betting parties or to both parties.

A game of chance via the telephone is gambling in which the results partly or fully depend upon chance and in which the player participates by answering a question or otherwise according to the game rules, using a telephone and paying an entry fee according to the premium rate tariff determined by the game operator.3

There are different kinds of lotteries prescribed under the scope of Latvian gambling law:

  1. money and goods lottery – in money and goods lotteries, the participants take part by purchasing tickets or paying a participation fee in some other way, and the lottery operator offers money, goods, securities, etc. as a prize;
  2. numerical lotteries – in numerical lotteries (lotto, toto, keno, sport lotto, numerical lotto), the prize is received as a result of guessing the lucky numbers, symbols or other characters or combinations of characters referred to in the rules of lottery, and the prize depends on the amount and sum of the deposited bets;
  3. instant lotteries – are lotteries in which the participants may find out what prize they have won immediately after purchase of the lottery ticket;
  4. state lotteries – in Latvia, the monopoly of operating state lotteries is owned by the state. In state lotteries, the tickets or coupons are distributed exclusively in the territory of Latvia. The prize of the lottery shall be determined by conducting a public lottery;
  5. local lotteries – in the local lotteries, the prizes are determined by conducting a public lottery, and they shall be operated exclusively in the territory of a particular city, district, municipality or parish; and
  6. single local lotteries – in single local lotteries, the prizes shall be determined by conducting a public lottery operated during a public event and in the location where it is held. tickets may be distributed only during the respective public event and only in the location where it is held, and the total sum of the value of the lottery tickets shall not exceed €720. In a single local lottery, no prizes of money are allowed.4

iiGambling policy

Gambling and lotteries may be organised in Latvia only after receipt of the relevant gambling or lottery licenses. Only the games of chance, lotteries and additional games referred to in the Law are permitted in Latvia.

iiiState control and private enterprise

Gambling is supervised by the Lotteries and Gambling Supervisory Authority (the Authority). A gambling organiser may be any capital company registered in Latvia. The state lotteries shall be operated by a state capital company whose capital is totally state-owned and whose stocks are not subject to alienation or privatisation. The state-owned stock company is Latvijas Loto. However, local lotteries can be organised by any capital companies registered in the Register of Enterprises of Latvia.5

ivTerritorial issues

Gambling is regulated and licensed nationally by the Authority. Only in order to receive the permit for opening a casino, gaming hall, bingo hall, betting or betting place and organise the relevant gambling in specific premises, the gambling organiser shall submit an application to the local government.

vOffshore gambling

The Authority blocks illegal gambling sites and blacklists them. So far the Authority has blacklisted more than 1,500 gambling domains. In general, the Authority is stricter with local gambling suppliers than with the ones who are outside the jurisdiction.

Financial institutions and internet service providers (ISPs) must forward the names of Latvian citizens who attempt to transact with unauthorised gambling sites. Individuals caught attempting to commit these acts will henceforth face administrative fines of up to €350 per incident.

Legal and regulatory framework

iLegislation and jurisprudence

Latvia gained full independence from the Soviet Union in 1991. The country's gambling industry was largely unregulated before this time. In 1998, government officials here established the first true set of gambling laws, named the Lotteries and Gambling Supervisory Authority.

That year, the government created the Control Department to oversee the gambling industry. This group collects tax fees from gaming operators. The Licensing and Financial Analysis Division of the government is responsible for granting licenses to casino operators in the country.

The same set of gambling laws remained in place for several years. In 2005, Latvia launched the Gambling and Lotteries Law. This created a new framework for both land-based and online gambling companies to legally operate inside the country.

Thus, all the basic legal framework referred to gambling in Latvia was set out in the Law on Gambling and Lotteries. Gambling fees and taxes are regulated by the separate Laws, the Law on Lottery and Gambling Fee and Tax and the Law on Personal Income Tax.

iiThe regulator

Gambling in Latvia is regulated by the Lotteries and Gambling Supervisory Authority in accordance with The Cabinet and its stipulated procedures, as well as with the State Revenue Service (procedures laid down in the Law on the State Revenue Service), and with the police (procedures laid down in the Law on Police).

The Authority implements state policy in the organisation of gambling and lotteries, performs licensing, supervision and control of gambling and lottery organisers, as well as gambling service providers, develops draft regulatory enactments concerning the organisation of gambling and lotteries, ensures systematic accounting and statistical analysis of the gambling and lotteries market, registers gambling machines and equipment and provides state and local government institutions with the information necessary for the administration of the gambling and lottery tax, ensures the operation of the unified gaming machine control and monitors the system by using online data exchange with gambling organisers and maintains the self-restricted persons register.

iiiRemote and land-based gambling

The legal system distinguishes between remote and premises-based gambling. Remote gambling is defined as interactive gambling, and the player must participate in it by using electronic communication services in order it to be referred as interactive one.

ivLand-based gambling

Gambling may be organised only in casinos, gaming halls, bingo halls and betting or betting places, if the relevant licence of the gambling venue has been obtained.

A casino, a gaming hall, or a bingo hall is a place for organising gambling that is marked in the technical inventory plan of a building as a constructively separated room or several interconnected rooms. A casino is specially equipped for the organisation of slot machines, roulette (cylindrical games), card and dice games and must have at least 10 gaming tables, if the casino is located in Riga, or five gaming tables, if the casino is located outside Riga.6

It is prohibited to install and operate roulette (cylindrical games), card and dice game tables outside the casino. All gambling equipment located in a casino shall be owned by the capital company that has received the licence for the relevant gambling venue.

A gaming hall must have at least 20 gaming machines installed and operated. Only gaming machines owned by a capital company or purchased on the basis of a financial leasing agreement with the relevant issued licence may be installed in the gambling hall.7

Gaming machines may be installed and operated only in casinos and gambling halls. They may be operated only if they are interconnected in a single network of a gaming machine control and monitoring system, ensuring online data exchange with the Authority.

The premises for a betting or a wagering shop are the gambling premises marked in the building's technical inventory plan as a space or part of that space where bets for betting or wagering are accepted.

vRemote gambling

An online gambling operator can lawfully provide its services to a customer located in Latvia only if it has a valid gambling licence. There are two types of gambling licences that are available to the operators:

  1. a fully fledged gambling licence, which enables an operator to provide its services both land-based and online; and
  2. an interactive gambling licence, which enables an operator to provide its services online only.

The organisation of gambling through electronic communications services shall be deemed to be the organisation of games of chance in which participants perform any activities necessary for participation in those games by electronic communications services.

It is permitted to organise slot machine games, roulettes (cylindrical games), card games, dice games, bingo, wagering, betting and games of chance by telephone (i.e., interactive gambling) through electronic communication services. It is permitted to accept bets on betting or betting through electronic communications services. The total value of winnings in interactive roulette (cylindrical games), card or dice games may not be less than 80 per cent of the total bets placed.

The organisation of interactive gambling and the acceptance of bets is permitted only after the receipt of the relevant license issued by the Authority.8

There is a separate licence for the specific operations of the software providers (B2B) – live dealer studios located in the territory of Latvia.

viAncillary matters

Gambling machines and equipment, as well as gaming machine game programs that have been registered and certified may be installed and operated in Latvia. Each game, gaming machine and piece of equipment has to be registered with the Authority, assigning each gaming machine and piece of equipment its own identification number, which remains unchanged throughout the its operation. Issuance of an identification number to a gaming machine and equipment is a paid service provided by the Authority.

Certification is an Authority competence in which it is determined whether a gaming machine, its model and its gaming program comply with the standards of the manufacturer and the requirements of the regulatory enactments of Latvia.

A certification body accredited by a national accreditation body in accordance with regulatory enactments regarding the assessment, accreditation and supervision of conformity assessment bodies or another Member State of the European Union may certify a gaming machine, equipment, gaming machine game program, interactive gambling organisation system and interactive lottery organisation system. European Economic Area and European Free Trade Association national accreditation body for the right to perform testing and certification in the relevant field.

The registration of a gaming machine, equipment and gaming machine game program shall be performed in accordance with the procedures specified by the Cabinet. The Cabinet shall determine the information to be included in the certificate of conformity of a gaming machine, equipment and gaming machine game program.

viiFinancial payment mechanisms

Payment service providers are required to observe a blacklist of unlicensed gambling operators. The gambling regulator provides a list of unlicensed operators to payment service providers.

The licensing process

iApplication and renewal

A gambling organisation license shall be issued for a gambling organiser by the Authority that meets the following criteria:

  1. is a capital company registered in Latvia, which the paid-up share capital is not less than €1.4 million; and
  2. the share of foreign participants or shareholders in the share capital of the capital company does not exceed 49 per cent. This requirement does not apply to investors (residents) of the Member States of the European Union, countries of the European Economic Area and member states of the Organisation for Economic Co-operation and Development, as well as to cases when different rules for foreign investments are provided by international agreements approved by the Parliament of Latvia.9

In order to receive a gambling organisation licence, a capital company shall submit an application to the Authority, which shall be accompanied by:

  1. a copy of the financial statements (balance sheet and profit or loss statement) of the previous full quarters of the current year for the economic activity in the reporting period, if the capital company carries out commercial activities;
  2. information regarding the credit obligations of the capital company, the amount thereof and the loan repayment terms on the day of submission of the application;
  3. information substantiated by transaction documents regarding the origin of money and property invested in the share capital of the capital company;
  4. the development plan of the capital company for the next year of operation, indicating the intended types of gambling, the expected amount and distribution of income and expenses, the amount of profit and use; and
  5. a statement that the members of the council and the board of the capital company and the auditor comply with the requirements of the Law.10

Upon reviewing the application for the issue of a gambling licence, the Authority shall have the right to request additional information regarding:

  1. the participants or shareholders of the capital company in order to consider their financial position and reputation;
  2. members of the board and council of the capital company, the auditor, in order to decide on their compliance with the requirements provided in the Law;
  3. credit liabilities of the capital company;
  4. the origin of the funds or property invested in the share capital of the capital company; and
  5. the information specified in the development plan for the next year of operation.11

The Authority shall take a decision regarding the issue of a gambling services license within 90 of from the day of receipt of the application. If additional information and documents are requested, the Authority shall make a decision within 90 days of the day of receipt of the additional information and documents.

The licence shall be issued for an indefinite period of time and shall be re-registered with the Authority every year. The licence entitles the recipient thereof to organise the gambling specified in the licence throughout Latvia.

In order to receive a licence to organise interactive gambling (slot machine games, roulette (cylindrical game), card or dice games, bingo, betting or betting), the gambling organiser shall submit an application to the Authority, which shall be accompanied by:

  1. the rules of the intended gambling;
  2. a statement regarding the account or accounts opened with a credit institution registered in Latvia, which will be used in mutual settlements with players;
  3. information regarding the intended interactive gambling organisation system, including regarding the interactive gambling programs to be used in the organisation of interactive gambling;
  4. an opinion of the certification authority regarding the results of the inspection of the interactive gambling organisation system, including the compliance of the relevant interactive gambling organisation system with the security measures of the interactive gambling organisation system, which will be taken to prevent the influence of any person on the outcome of interactive gambling;
  5. information regarding the place where the equipment used for the organisation of the game will be located and regarding the intended security measures that will be taken in order to prevent the influence of any person on the outcome of the organised gambling;
  6. information regarding the intended personal data protection measures;
  7. the internet address used for the organisation of the game, if the gambling is organised via the internet; and
  8. information regarding the person responsible for gambling, indicating his or her name, surname and personal identification code.12

The Authority shall take a decision whether to grant the gambling premises licence within 30 days of receipt of the application. If additional information and documents are requested, the Authority shall decide whether to grant the gambling premises licence within 30 days of receipt of the additional information and documents.

The gambling operator shall re-register the casino, gambling hall, bingo hall licence or the premises licence of a betting or a wagering shop annually by the date indicated in the decision to grant the respective casino, gambling hall, bingo hall licence or the premises licence of a betting or a wagering shop.

iiSanctions for non-compliance

The Authority is entitled to suspend the operation of a gambling organising licence, a lottery organisation licence and a gambling venue licence or the operation of gambling machines and equipment until the violation is remedied if it is established that the gambling and lottery organiser violates gambling and lottery regulations or other regulatory enactments.

The officials shall warn the organiser of gambling or lotteries in writing, mentioning all established violations of regulatory enactments and setting a term from one month to three months for the elimination of violations, unless the parties agree on a shorter term.

If all the violations referred to in the warning have not been eliminated within the specified term, the relevant official shall issue a written order to suspend the operation of the gambling organisation licence, lottery organisation licence and gambling organisation place licence or the licence of gaming machines and equipment operation.

The organiser of gambling or lotteries shall notify the Lotteries and Gambling Supervision Inspectorate in writing regarding the prevention of violations of regulatory enactments, which shall, within seven days of receiving the report, verify whether the violations have been eliminated.

A person who organises gambling or lotteries without a licence issued by the Authority, or who organises gambling or lotteries that are not referred to in the Law, shall be held administratively or criminally liable as provided by law. The income obtained as a result of the activity shall be transferred to the state budget.13

The payment service provider shall not commence a business relationship with an illegal gambling operator or its intermediary. This is indicated in the decision of the Gambling Authority, sent to the payment service provider, on the prohibition to commence and continue the business relationship with a gambling operator that conducts activity without the licence specified in the laws and regulations or its intermediary (unlicensed gambling operator). If the payment service provider has commenced a business relationship with the unlicensed gambling operator, it shall terminate such business relationship after receipt of the decision.

Wrongdoing

The rights and obligations of an organiser of gambling and lotteries in the prevention of money laundering and terrorist financing is determined by the Law on the Prevention of Money Laundering and Terrorist Financing.

Taxation

Lotteries and gambling tax shall be paid by a capital company that has received a special permit (licence) for the organisation of lotteries or the necessary licences for the organisation of the relevant gambling in accordance with the procedures prescribed by law.

The object subject to the gambling tax is the gambling organiser – a capital company, a gambling venue and gaming equipment. A tax shall be levied on each direct or installed gambling venue at the following rates for each current calendar year:

  1. roulette (cylindrical game) – for each gaming table connected to the roulette rotating device – €28,080;
  2. card and dice games – for each table – €28,080;
  3. gaming machines – for each gaming machine at each gaming venue – €5,172;
  4. games of chance over the telephone – 15 per cent of the revenue from the organisation of this game;
  5. sweepstakes and betting – 15 per cent of the revenue from the organisation of this game;
  6. bingo – 10 per cent of the revenue from the organisation of this game; and
  7. if gambling is organised using telecommunications, the gambling tax, regardless of the type of game, is 10 per cent of the revenue from the organisation of that game.14

By the first day of each month, the gambling organiser shall notify the Authority of the number of gaming machines and gaming tables to be operated in the relevant month at each licensed gambling venue. The gambling organiser may move a gaming machine or gaming table to another gambling venue within a calendar month, without changing the total number of gaming machines and the number of gaming tables in each specific gambling venue announced by the first day of each month.

The lottery and gambling winnings shall be added to other taxable income of a natural person. However, lottery and gambling winnings, if the amount of the winnings during the taxation year does not exceed €3,000, shall not be included in the annual taxable income and shall not be taxed.15

Advertising and marketing

Advertising of gambling is prohibited outside gambling venues. Only the name of the gambling place and the registered trademark of the gambling organiser may be indicated at gambling venues. It is prohibited to offer participation in gambling for free, as a gift or prize or as compensation for the purchase of goods or receipt of services.

The year in review

It was a year when – for the first time – the Latvian gambling industry was suspended. Banned since March due to the covid-19 pandemic, the gambling industry in Latvia was allowed to resume operations on 10 June 2020. Parliament passed a bill on 5 June 2020 that effectively allowed the return of gaming. Under the bill, both online and land-based gaming operations could return to business. During the period of suspension, operators challenged the country's suspension of all gambling licences; two legal cases from operators were initiated in the Constitutional Court of Latvia.

Outlook

Parliament recently passed amendments to the Law on Lottery and Gambling Fees and Tax, which came into force from 1 January 2021. The amended legislation provides that revenues from the lottery and gambling fees, lottery tax revenue for the organisation of state-wide lotteries (including instant lotteries) and gambling tax revenue will be transferred in full to the state budget. Previously, 95 per cent of the revenues were transferred to the state budget and 5 per cent were transferred to the budget of the local government of the territory in which the gambling is organised.

Additionally, from 1 January 2020, a natural person may submit a request to be included in the register of self-denied persons from gambling and interactive lotteries:

  1. in person at the Authority on working days;
  2. remotely, on the website https://registrs.iaui.gov.lv/, indicating the term in years (the minimum term is one year); and
  3. in person at any time at all gambling venues in Latvia.

Footnotes

1 Andrius Gabnys is the founding attorney-at-law at Gabnys Law Firm.

2 Latvian Law on Gambling and Lotteries, 2006.

3 Latvian Law on Gambling and Lotteries, 2006.

4 ibid.

5 Latvian Law on Gambling and Lotteries, 2006.

6 Latvian Law on Gambling and Lotteries, 2006.

7 ibid.

8 Latvian Law on Gambling and Lotteries, 2006.

9 Latvian Law on Gambling and Lotteries, 2006.

10 ibid.

11 ibid.

12 Latvian Law on Gambling and Lotteries, 2006.

13 Latvian Law on Gambling and Lotteries, 2006.

14 Ministry of Finance Republic of Latvia, Tax system in Latvia, 2020.

15 Ministry of Finance Republic of Latvia, Tax system in Latvia, 2020.

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