Sportingbet will pay up to €17.2m to settle a four-year retrospective tax bill in Spain to increase its chances of being among the first wave of online gaming licensees there on 1 June.
The London-listed sports betting and in-play specialist, forced to turn off earnings from its second largest market in late March after it lost an appeal against a local court injunction, is to make a payment of €14m plus surcharges and interest of up to €3.2m. Sportingbet is to cover the outlay through the issue of £15m in convertible bonds.
Sportingbet’s settlement follows just 24 hours after the €33m settlement brokered by bwin.party, with other European online operators also racing to complete tax self-assessments dating back to the start of 2009 ahead of the issue of the country’s first online gaming licences on 1 June.
Sportingbet, that operates mainly under the Miapuesta brand in Spain and also owns the Paradise Poker brand, said it expected the payment to qualify it for inclusion in the first round of licences to be issued on 1 June 2012, when it intends to apply immediately to the Commercial Court No 10 in Madrid to cancel the current injunction over its Spanish-facing business, it revealed in a statement this morning.
Sportingbet generated 9.4% of its revenue from the territory in the last half year to 31 January but was forced to block Spanish customers from 27 March after the Mercantile Court of Madrid rejected Sportingbet’s appeal against a December closure order on the basis that “any offering of gaming or betting activity that has not been granted a prior administrative authorization is, indisputably, prohibited”.
Sportingbet’s shutdown in Spain followed a successful action brought by Spanish land-based operator Codere, citing “illegal competition” from and non-payment of taxes by online operators, finally succeeding to secure an injunction after failing with actions against bwin and PokerStars in 2010. Codere’s action succeeded despite Sportingbet and other operators paying taxes in Spain since last July under the Spanish Gaming Act. Sportingbet stated in its last results that it paid taxes of £7.9m in its second and third largest markets of Spain and Greece in the last half-year.
Codere’s court action against Betfair is due to be heard again on the day the first licences are due to be issued, 1 June. Betfair is also understood to be completing a tax self-assessment with a view to clearing this potential obstacle ahead of licences being issued next month.
bwin and PartyPoker owner bwin.party digital entertainment yesterday announced settlement of its €33m to tax liablity ahead of licences being issued on 1 June, despite co-CEO Norbert Teufelberger stating his belief just days earlier that Spanish authorities had no right to claim four years of back taxes by retrospectively applying laws from 1966 and 1977 that applied to offline gaming activities.
The last-minute tax grab has come from a Conservative government faced with implementing unpopular austerity measures aimed at cutting the country’s budget deficit amid a worsening economic climate. The unemployment rate in Spain reached 24% in the last quarter.
The Spanish regulator has confirmed the receipt of beween 55 and 60 applications to offer online products including betting, poker blackjack, roulette and baccarat. All products will be taxed at between 20% and 25% of gross profit. Slots, bingo and in-play betting have not yet been included in the regulation. Bet365, Ladbrokes, 888, William Hill and Paddy Power are among the other pan-European operators understood to have applied for permits in Spain.
