The Tax Landscape for Casino Games in Egypt

Casino games are key to global entertainment, attracting millions and shaped by tax regulations for casino games in Egypt. In addition to their role in boosting tourism, as most casino patrons in Egypt are branches of foreign companies, casinos contribute to supporting national economies through taxes imposed on their total revenue, which includes returns from all games offered, from table games to slot machines.

This tax is levied on the total revenues of casinos, which is the most common form of taxation in this field. A percentage is determined from the total income of the casino, covering all profits from table games and slot machines.

Tax Implications in Egypt for Casino Games

Value-Added Tax (VAT): Mechanism for Calculating, Collecting, and Remitting VAT: The Gross Gaming Revenue (GGR) is determined by the total amount collected from patrons of the gaming hall, with a tax base set at 21.5% of the total revenue generated from these games, which represents the added value of the activity.

Deductibility of Inputs Tax Related to VAT

The VAT imposed on the tax base is calculated according to the general tax rate, without any deducting the input tax related to the expenses of ticketing and operating various gaming halls. The 21.5% of the tax base represents the added value of the activity.

Income Tax: Deductibility of VAT Under Law No. 91 of 2005: The previously paid VAT on the inputs of companies operating in this field, related to the management and operation of gaming halls, is not deductible as a cost under the provisions of the Income Tax Law, Law No. 91 of 2005. Thus, it cannot be deducted from the income tax base when preparing the tax return.

Tax Obligations for Gaming Halls

The manager of the gaming hall must notify the bank responsible for managing the account of the total gaming revenue, including VAT. The bank shall deduct 3% of the total revenue monthly, which represents the tax rate (14%) on the net added value generated by the activity, estimated at 21.5% of the total gaming revenue, and remit it directly to the Egyptian Tax Authority in the name of the gaming hall that earned the revenue.

Challenges in Applying the VAT Law to Casino Games

The cooperation protocol signed between the Ministry of Finance, the Ministry of Tourism and Antiquities, and the Egyptian Tourism Federation did not provide clear details or specific solutions to deal with the complex tax challenges faced by the casino industry. Despite the protocol’s aim to enhance cooperation among various entities to support the sector, it lacks the necessary mechanisms to comprehensively address tax issues, leaving many problems unresolved and negatively impacting the competitiveness of this important sector.

Although the philosophy of the VAT Law is based on the possibility of deducting input tax related to the activity, this sector has not been able to benefit from any input tax deduction, indicating shortcomings in addressing its tax challenges.

Some challenges in applying the VAT Law to casino games include:

• Defining the Service: It can be challenging to precisely define the service provided by casinos, especially for games that involve an element of chance and skill.
• Valuation of the Service: It may be difficult to determine the total value of the service provided, especially for additional services offered by casinos. Therefore, the cooperation protocol between the Ministry of Finance, the Ministry of Tourism, and the Egyptian Tourism Federation should be updated.
• Legislative Ambiguity: There are still some unclear areas in applying the VAT Law to casinos, such as whether the tax should be imposed on gross profits or only on certain services, creating legal uncertainty and affecting the institutions’ compliance.
• Compliance and Tax Reporting: The casino industry relies heavily on cash, and the protocol did not provide sufficient flexibility for implementing the law’s provisions, making it difficult to track revenues and provide accurate reports to the tax authorities. This could lead to non-compliance, exposing the industry to fines and penalties.

Conclusion

The application of the VAT Law to casino games in Egypt faces several challenges related to the nature of this industry. Addressing these challenges requires clearer legislation or guidelines on how to calculate and collect VAT in the casino industry, as well as providing incentives to promote compliance and achieve a balance between the state’s requirements and investors. Given that most of the patrons in this industry in Egypt are branches of foreign companies, this contributes to supporting the tourism sector in addition to attracting foreign investment. Therefore, providing a favorable tax and economic climate can enhance Egypt’s competitiveness as an investment and tourism destination.

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