Pulse

Buenos Aires: coordination between the City and Province is key

By Lewis - 28 February 2021

At the turn of the year, IPLyC, the gambling regulatory authority for the Province of Buenos Aires, concluded its online gambling licensing process.

Ahead of his appearance at SBC Digital Latinoamérica, Tomas Garcia Botta, Partner at MF Estudio, offers insight into how he expects the online market to develop and the significant regulatory nuances between the Province and City of Buenos Aires.

Following the conclusion of Buenos Aires’ Province Tender, who has secured licences and what are the terms?

In the Province of Buenos Aires there is a cap on the number of licences. Law No. 15,079 stipulated the regulator can only issue up to seven licences. The licensees are William Hill, bet365, Betsson Group, Playtech, Intralot, The Stars Group and 888 Holdings.

The framework was originally designed to target foreign companies who are established and internationally recognised and not to allow the participation of local land-based operators.

However, in 2018 there was the addition of a last-minute requirement stipulating that in order for foreign companies to participate in the tender they had to partner up with local land-based companies. The above-named companies have therefore partnered with local operators as part of the contract.

There are reports Governor Kicillof will intervene and try to block the launch of the new gambling regime. Is there any word on the future of the online gambling licences in the Province?

It was the government who gave the final approval for the licences to be granted so it seems contradictory now that licences have been awarded to block the online gaming business.

In the context of a potential second wave of Covid-19, there should be a focus on online gaming businesses to get another revenue stream to cope with a potential closure of bingo halls.

When are operators expected to go live?

If you asked the regulators, they would like the operators to go live as soon as possible. However, the implementation of technical projects takes some time and involves a lot of stakeholders.

These are complex processes and most of the companies would like to prioritise quality over speed, particularly taking into consideration that this is the first time we have live legal operators in the Province and City of Buenos Aires.

It is expected that operators will go live in the City of Buenos Aires sometime during Q1 2021. In the case of the Province of Buenos Aires, we may expect a longer timeframe, although it should not exceed 2021.

If and when the new online gambling regime is given the green light and goes live, how do you anticipate it will impact the market?

There will be some friction between the City and Province of Buenos Aires. For those unfamiliar with the geography, the City of Buenos Aires is the capital district which is surrounded by the Province of Buenos Aires. Prior to Covid-19, we had around three million people commuting each day.

These three million people, if domiciled in the Province, will be considered Province players following the regulation. If they were allowed to open an account and play in the City, there might be some issues between the jurisdictions.

There are some things the City and Province need to work on to make this sustainable in the medium term. If this first milestone is met and they are able to show some coordination, my guess and wishful thinking would like the market to open up.

Other jurisdictions are looking at what happens in the Province and City as they assess potential models. For example, Mendoza Province passed some regulation in December and is looking to launch a tender.

The City of Buenos Aires’ LOTBA amended the terms of the permit application process, allowing international online gaming agency permits. What are the requirements?

The terms for applying for an online gaming agency permit are more flexible in the City of Buenos Aires. The experience requirement is not limited to gambling operations but any electronic commerce operations.

There is also a requirement on revenue which is achievable – online operations of around $1.2m. The net worth threshold which was a big requirement in the Province of Buenos Aires ($100m), the City requires $25m. It’s difficult due to the instability of the peso in Argentina to measure this in connection with local companies, whilst is easier for international operators to reach these parameters.

In addition, the City of Buenos Aires does not require international operators to partner with local companies – they can go alone if they want to. Now we enter into an issue of strategy. In my opinion, it is always better to look for a local partner when entering a new market, particularly a complicated market such as Latin America and Argentina. Some local advice is certainly necessary to get a successful result.

What are the respective tax rates for online gambling in the City and the Province of Buenos Aires?

In Argentina, we have a federal model with three taxation models. The federal taxation level has VAT and income tax over capital gains, alongside other taxes. On a provincial level such as the City of Buenos Aires and Province of Buenos Aires, we have the administrative fee and the turnover tax. The turnover tax is a sales tax but doesn’t provide an offset mechanism so its applied in each step.

Then you have the third level which is the municipal level that you don’t have in the City of Buenos Aires, but you do have in the Province. If operators are going to set up an office in the Province of Buenos Aires, as they are required pursuant to the tender, they will also be subject to municipal taxes.

At a very high level, municipalities levy taxes on real state and also over turnover. Income tax rate for gaming companies is 41.5 per cent. Turnover tax plus the administrative fee is around 20 per cent of GGR in the City of Buenos Aires and 25 per cent of GGR in the Province.

Will the government continue to subsidise the horse racing industry?

I think so. I don’t see why there would be a change in approach to the horse racing industry. It is one of the biggest employers in the country so it wouldn’t make any sense to stop supporting this industry.

The gambling licence for floating casinos has expired. What is the future for floating casinos in Buenos Aires?

There is one floating casino in Buenos Aires with two boats that are connected. There is currently a lawsuit with the City of Buenos Aires and with the federal government in a federal court.

They have an injunction allowing them to continue operating and are working on a concession given to them by the national government before the competence on gambling and gaming was transferred to the City of Buenos Aires. As long as the injunction remains in place, the floating casino will continue to operate.

What does the future hold for Buenos Aires?

We’re starting from scratch with regards to legal online gambling in the Buenos Aires region (City and Province) so there are plenty of opportunities out there. As I see it, it’s important for regulators not try to reinvent what has already been invented and to learn from past experiences, whether on a local or international scale. Whilst political and economic factors cannot be controlled, regulators need to try and take as much advice as possible to create solutions that are sustainable in the medium term.

MF Estudio is a boutique law firm based in Buenos Aires which focuses on providing bespoke legal advice to all verticals of the gaming and gambling industry. Tomás E. García Botta is based in Buenos Aires and his practice focuses on tax litigation, as well as regulatory and gaming matters.

He graduated from the Universidad de Buenos Aires and is licensed to practice law in Argentina, having been admitted to the bars of the City of Buenos Aires (Colegio Público de Abogados de la Capital Federal) and the Province of Buenos Aires (Colegio de Abogados de San Isidro).