The Isle of Man is a global center for the regulation of online and remote gaming. Julia Connolly of Sovereign Trust (Hong Kong) Limited explains why the island, which is expected to issue its 50th license soon, is the preferred jurisdiction for many e-Gaming operators, especially those based in Asia
In 2007 the UK Gambling Commission added the Isle of Man to their “white list” of e-Gaming jurisdictions, meaning that operators based there can advertise in the UK and take on UK-based players without needing a separate UK license. It also means Isle of Man-based companies can sponsor UK sports events and teams. This can be a very interesting proposition for Asian operators, given the popularity of English Premier League football in the region.
The Isle’s success was recognized earlier this year in eGaming Review’s “Business to Business Awards” when local companies were nominated in 18 categories and picked up five prizes. Winners included Continent 8, Playtech and Microgaming.
“To have won five awards is an exemplary achievement and goes to demonstrate the quality of the Isle of Man’s e-Gaming sector and its continued status as a world-leading center of excellence for the industry,” said Alex Downie of the island’s Department of Economic Development.
But success didn’t come overnight. The Isle’s efforts in the sector go back to 2001, when it became one of the first jurisdictions to introduce specific legislation aimed at both regulating and facilitating online gaming.
The Gambling Supervision Commission, which regulates the gaming industry, dates back to 1962, when it was established as the Gambling Control Commission, making it one of the longest-established gambling regulatory bodies anywhere. New legislation was introduced in 2006 under which the GSC was made responsible for the granting of licenses and undertaking online gaming supervision, ensuring the fair and proper conduct of gaming by Isle of Man operators and enabling them to compete effectively worldwide by facilitating competition and allowing for the provision of modern products and services. In 2010, the GSC became a separate statutory board, providing it with the independence expected internationally of regulatory bodies.
The commission operates according to three key principles: 1) ensuring that gaming is conducted in a fair and open way; 2) protecting children and other vulnerable persons from being harmed or exploited by gaming; and 3) preventing it from being a source of crime or disorder, or being used to support crime. These principles are protected through a combination of rigorous checks on operators at the application stage coupled with a thorough, ongoing inspection regime for licensees and a robust complaints and queries procedure.
In the Isle of Man one license covers all gaming activity. To be granted a license, the business must be carried out by a locally incorporated company, the servers must be hosted on the island, and the banking of both operational and player funds must be conducted there. At least two of the operating company’s directors must live on the island.
Licensed corporate service providers, such as Sovereign Trust (Isle Of Man) Limited, assist companies in dealing with these requirements by providing resident directors, helping set up bank accounts and introducing operators to local datahosting centers. Support is always available as well from the government’s dedicated e-Gaming Team.
Activities such as marketing, software provision, skills games, disaster recovery, back-office functions and affiliate work can be carried out without a license.
Transparency, Stability
The island’s inclusion in the UK’s “white list” of e-Gaming operators confirms its status as a quality jurisdiction that maintains excellent standards of legislation and regulation. The listing is crucially important as only licensed operators actually based in a white-listed jurisdiction can promote their services in the UK. Thus an operator cannot establish a notional presence on the island merely in order to obtain such market access.
Additionally, as more European jurisdictions consider legislation that accommodates online gambling, the island will enjoy the advantage of an excellent track record of constructive and progressive relations with European governments and a reputation for working hard to secure access for its operators across the continent.
Its world-class telecommunications facilities provided by Manx Telecom and Cable & Wireless are also vital considerations for e-Gaming operating companies. The island’s self-sufficient power station supports not just remote gaming operators but also operators looking for jurisdictions within which to base their disaster-recovery facilities. There are currently five major hosting companies based on the island that offer comprehensive, secure online services and can provide the equipment, facilities and know-how required by the most sophisticated operations.
Licensees also enjoy the benefit of worldclass banking, legal and corporate service expertise, plus a low betting duty (0.1% to 1.5% on gross profit), no corporate tax and no VAT on betting or wagering conducted by locally licensed operators.
Personal tax rates are similarly low, with individual allowances for island residents among the most generous in Europe. Tax is paid at a rate of 10% on the first £10,500 of taxable income above the allowance, with the remainder charged at 20%. Moreover, an individual’s maximum personal tax liability in any financial year is £115,000. There is no capital gains tax, nor are any wealth, gift and inheritance taxes levied.
Taken all together—state-of-the-art telecommunications, world-class financial services and support and business-friendly tax climate—coupled with the ability to float local companies on the UK’s AIM market— the island presents a compelling proposition to potential operators.
Political stability is another key consideration. The Isle of Man is a selfgoverning dependency of the British Crown, with close ties to the UK but with its own government and laws. The legislature, known as the Tynwald, is the longest continuously functioning parliament in the world. And there are no political parties. The island also enjoys a special status with the European Union that facilitates free trade, and EU citizens are able to reside in the island without restriction.
The strength of the financial environment is another plus. The government’s budget is required to remain in surplus, and the island has benefited from a Moody’s AAA credit rating and AA+ from Standard & Poor’s for more than 10 years.
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In June 2012, the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes found the Isle of Man to have all the elements of effective tax information exchange in place, following a rigorous assessment of its legal and regulatory framework, together with the practical implementation of standards. The island has been a leader in this area, putting in place tax cooperation agreements with its partners around the world and signing five double tax treaties and 25 Tax Information Exchange agreements to date.
The government remains committed to promoting the island as an open, transparent and well-regulated jurisdiction and to enhancing its standing in the global community. It has adopted a balanced approach to providing robust levels of regulation while at the same time allowing reputable businesses to flourish.
It is this responsible approach to a rapidly growing industry and an ongoing commitment to that industry that has led so many leading e-Gaming operators and suppliers to locate there.
