Christoph Bruckschweiger September 3 2009 Government Proposes New Legal Framework on Gambling Ritter & Wohlwend | Private Client & Offshore Services - Liechtenstein Christoph Bruckschweiger Private Client & Offshore Services BackgroundLicensing ObligationsSmall OperatorsSupervision of OperatorsTaxCommentBackgroundEU countries have relaxed their gambling laws. Liechtenstein has not kept up with these changes. Technical advances in gambling have led to a broad variety of types of gambling, including electronic, mobile telephone and online gambing.The relaxation of gambling laws in Switzerland has prompted a new approach in Liechtenstein, which hitherto has had no specific gambling law. The government's draft law is based on the legislation of neighbouring countries. It aims to ensure secure and transparent gambling and to prevent the use of gambling for money laundering and other crimes, such as Ponzi schemes. The government intends to regulate by an act of law any form of game of chance with monetary advantages. This integrated concept is new and unique in Europe, as it comprises codes of conduct, standards of organization and competence on the one hand, but leaves scope for authorities to deal with specific cases at their discretion on the other. Licensing Obligations To ensure that gambling is subject to high standards, licences are linked to strict requirements. They are granted only to operators with sufficient equity capital. The management of such operators must provide certificates of good character and certify irreproachable management. Applicants must provide security and evidence of social awareness, which must be maintained throughout operation. If applicants seek to obtain a casino or online gambling licence, due diligence (eg, an explanation of the origin of its funds) must be in evidence. Applicants for casino licences must be able to show the economic benefit of a casino. Licences for casinos, online gambling or two or more gambling machines are awarded only to companies limited by shares domiciled in Liechtenstein, whose share capital is divided into named shares. Small Operators An operator is 'small' if it operates no more than two gambling machines. The definition also applies to lotteries with no more than Sfr100,000 at stake and special online terminals that read lottery tickets. Such operators are subject to less strict requirements. Supervision of Operators Supervision is carried out in principle by the government, which awards and withdraws licences. The Department of Economy carries out daily supervision, such as: checking on compliance with the law; reviewing whether operators have efficient internal control and supervision systems; and supervising management.The department can: issue and execute its own orders; subject gambling operators to special audits; and access gambling facilities at any time. Tax In addition to income tax, a special tax will be introduced for gambling operators based on gross gambling revenues. In return, gambling operators will be exempt from value added tax. The rate of special tax will vary between the different types of operator. The government will ensure that the rates are internationally competitve and that invested money yields solid profits. All proceeds of the special tax will go to a newly constituted fund which will be used for non-profit and charitable purposes. Comment The government intends to create an attractive legal framework for gambling in Liechtenstein. As there has previously been no gambling law in existence, the government hopes to establish Liechtenstein as an attractive place to set up gambling businesses. All adverse elements of the gambling industry shall be limited as far as possible. Money laundering will be a top priority when supervising gambling operators.For further information on this topic please contact Christoph Bruckschweiger at Ritter & Wohlwend by telephone (+423 236 55 33), fax (+423 236 56 11) or email ([email protected]).