Topics About New Peruvian Regulation of Sports Betting and Online Gambling

From the enactment of Law No 31557 (2022), its modification of Law No 31806 (2023), and the recent Supreme Decree No 005-2023-MINCETUR*, the Regulation of Sports Betting and Online Gambling in Peru took place.

*MINCETUR is “Ministerio de Comercio Exterior y Turismo” – “Ministry of Foreign Trade and Tourism”.

The law has defined the General Framework of Requirements and Operations for the activity, and has regulated the intervention of the different operators and global agents in Peru, through the definition of a clear policy, both for fixed or resident establishments, and for online systems.

The new norm, maintaining the coherence and legislative development coming from the Peruvian law of casinos and slots (Law No 27153 of 1999 and Law No 27796 of 2002), has largely translated the legal structure under which the activity of sports betting can be developed in retail locations within the country.

The legislative development has not been surprising, since in the internal debate the standards of social surveillance, tax structure, health, and protection of the population have been maintained, based on the different self-regulations imposed by the sector.

In terms of foreign online gambling operators, the full and guaranteed openness that Peru maintains to international investment has remained within the constitutional framework, which enshrines equal treatment for foreign investment and the financial schemes that make it viable, such as the floating exchange rate and market supply, as well as the freedom of remittances abroad.

International operators will find with this new standard in Peru the legal instrument that will allow them, not only to participate in a well and fully regulated market, but in a market in which they will enter on equal terms for free competition of the different products they offer.

In legislative matters, the law and its regulation already constitute the regulatory legislative body of the activity.

Unlike the law, which is a norm produced by the Legislative Power (Congress), the regulation of the law is a norm produced by the Executive Power and published through a Supreme Decree of the Ministry of Foreign Trade and Tourism.

In Peru, the regulations are executive and expressly determine the detail and development of the basic principles of the law of the sector.

Finally, it is important to note that with the issuance of Laws No 31557 and No 31806 and Supreme Decree No 005-2023-MINCETUR not only the political will of the Peruvian state to consider sports betting and online gambling as activities allowed in the legal system, but also as economic activities subject to regulation, supervision, and control, with respect and openness to foreign investment, is expressed and with full participation of the different operators and investors of the world market.

Stability and facilities for foreign investment in the new Peruvian legal framework

The importance of the future entry into force of the new Law of Sports Betting and Online Gambling (Law No 31557 Amended by Law No 31806) lies in the possibility that every foreign investor has the opportunity that the result of their business can be freely sent abroad thanks to the fact that the Peruvian market has solid economic principles protected and enshrined by the Political Constitution, including:

• buoyancy of the exchange rate based on market and demand;
• free and unrestricted transfer of remittances abroad; and
• transparency and rigour of the compliance measures of the national financial system.

Foreign investment in Peru: branch or subsidiary?

In Peru, capital companies require a minimum plurality of partners.

In that sense, an option to explore in order to respect the corporate policies of non-domiciled parent companies could be to create a branch in the country of the original company.

This option would allow the non-domiciled parent company to be the sole partner, which would coincide with what many foreign companies are looking for as an option.

Another alternative is known in Peru as the subsidiary which is the corporate form that, complying with the plurality of shareholders, is dominated and controlled by a majority of a parent company, being able, with a minimum percentage, to receive the intervention of another shareholder.

This option is very common, for example, in the world of mining investments in Peru, and by registering as a subsidiary the business is fiscally transparent.

The firm considers it important to suggest maintaining a corporate vehicle that, although it maintains a link with the parent company, does not allow to extend interpretations linked to the different responsibilities, thus avoiding or discouraging any investment initiative in the country.

Regional leadership of Peruvian gaming legislation

After the effective legal and regulatory framework provided by the Gaming Law (Law No 27153 of 1999 – just for casino and slot machines’ retail operations) which is considered an exemplary norm at the international level, Peru has taken a new and positive step in the regulation of its gaming market with the new Law on Sports Betting and Online Gambling (Law No 31557 Amended by Law No 31806) whose regulation has been published by the Ministry of Foreign Trade and Tourism (Supreme Decree No 005-2023-MINCETUR), so that the law enters into force, which positions Peru as one of the leading countries in the regulation of this sector at not only a regional level, but also an international one.

Notes on tax matters for the regulation of the Peruvian Law of Sports Betting and Online Gambling

With the publication of the regulation of the Law of Sports Betting and Online Gambling in Peru by Supreme Decree No 005-2023-MINCETUR, the firm sees that the norm will be to seek to contemplate requirements whose mandatory compliance does not discourage foreign investment through onerous and/or anti-technical requirements that are intended to be imposed within an impractical and less thoughtful legal framework.

For example, the non-domiciled operator shall not be obliged to establish a tax domicile in the country.

The firm’s reflection is generated because the author has recently read in the media the plan of the Brazilian government to “force” foreign sportsbooks to have a “headquarters” in that country.

This has caused motivation to share the author’s opinion in relation to the healthy balance that must exist between the logical collection function of the tax administration versus the necessary facilities for the foreign investor to develop business activity in the country.

That is, the understandable need of the tax administration that the taxpayer has a tax domicile should not collide or oppose the freedom or power that the administered has to plan and design its own corporate policy in the country of destination of its investment, without necessarily having to constitute “headquarters” in the country because the government orders it.

It must be sufficient for the taxpayer to comply with any of the possibilities or alternatives of tax domicile that the national legal system allows for all.

The way to seek effective tax collection is to encourage economic activity with operationally viable regulations and to be intelligently designed and legislated to achieve and access the desired fiscal objective, not establishing obstacles, administrative impediments, or regulatory restrictions that discourage foreign investment.

New Peruvian Law of Sport Betting and Online Gambling (Law No 31557)

Validity of the Law:

• The entry into force of the Law will be four months (120 days) after its regulation is published by the Ministry of Foreign Trade and Tourism. (MINCETUR – Ministerio de Comercio Exterior y Turismo).

Purposes of the Law:

• Guarantee an activity with transparency.
• Prevent access to minors and people with pathological gambling.
• Avoid money laundering.

For whom the Law applies:

• For holders of sports betting platforms, online gambling, and e-sports.
• For retail locations.
• For technical certification laboratories.

Competent Regulatory Authority:

• Ministry of Foreign Trade and Tourism (MINCETUR).

Functions of the regulatory entity (MINCETUR):

• Grant licences.
• Impose sanctions.
• Issue directives.
• Authorise bets.
• Supervise money laundering.
• Supervise sports betting platforms, online gambling, and software.
• Require the blocking of unauthorised gambling websites.
• Destroy confiscated property and equipment.

Authorised to operate sports betting platforms and online games:

• Peruvian companies domiciled.
• Branches in Peru of foreign companies.
• Foreign companies not domiciled in Peru.

Operating licences:

• Term of six years – renewable.
• Non-transferable.
• MINCETUR informs the UIF (Financial Intelligence Unit of the Ministry of Economy and Finance) and SUNAT (Tax Authority) about licences granted.
• Any betting platform to be operated must be previously authorised by MINCETUR.
• Exploitation of licences under domains “bet.pe”, “.bet”, “.com”, “.pe”, or “.com.pe”.
• Any unauthorised operation is considered legally prohibited and criminalised.

Homologation of betting and gambling platforms:

• Necessarily registered and approved by MINCETUR.
• Previous certificate of compliance issued by an authorised laboratory.
• Registration period for platforms: two years – renewable.
• Registration period for programs (software): indeterminate.

Operation of retail locations:

• They require MINCETUR authorisation.
• More than 150 metres from schools and churches.
• Only for Peruvian companies domiciled.
• Prerequisite – operate betting platform authorised by MINCETUR.
• The term of the authorisation of the location – circumscribed to the term of the registration of the platform.
• A single MINCETUR authorisation for each location.
• Only one betting platform is allowed per location.
• In all proceedings, the negative administrative silence of MINCETUR is applied.
• Municipal (county) operating licences only for authorised locations.

Types of bets:

• Sports betting – only federation, league, or association sports.
• Online gambling – only registered and authorised by MINCETUR.
• It is allowed to play on computers, cell phones, and tablets.
• Betting terminals can only be inside the betting locations.
• Tickets are only delivered inside the location.
• Cryptocurrency payments are not accepted.
• No anonymous bet – every player must be fully identified.
• The payment of prizes in media that the player chooses or in a local bank account in Peru.
• Equestrian betting is governed by its own rules on the matter.

Access to technological platforms:

• Real-time data transmission to MINCETUR and SUNAT.
• The servers may be abroad, but must be certified by MINCETUR.
• Allow MINCETUR and SUNAT access to personal data of customers and prizes.

Guarantees in favour of MINCETUR:

• To guarantee payment of prizes and administrative fines.
• They can be: bank deposit, bank bond, or surety insurance policy.
• Only from local banks or insurance companies in Peru.
• Warranty term: one year – renewable.
• For each betting platform: 600 UIT (USD780,000 approx) or 3% of annual net income (whichever is greater) – UIT is “Unidad Impositiva Tributaria” (Peruvian Taxation Unit – PEN4,950 or USD1,300 approx).
• For each certification laboratory: 100 UIT (USD130,000 approx).

Sports betting advertising:

• Prohibited for betting operators not authorised by MINCETUR.
• It is allowed to sponsor companies, people, and events.

MINCETUR sanctions for breach of law:

• Fine that can reach up to 200 UIT (USD260,000 approx).
• Temporary or definitive cancellation of permits and licences.
• Disqualification for operators for up to ten years or permanently.
• Blocking web pages.

Infractions punishable by MINCETUR:

• Exploiting unauthorised betting platforms.
• Exploit non-approved online gambling.
• Use internet domains other than those allowed.
• At the request of MINCETUR, the Ministry of Transport and Communications will block unauthorised websites, platforms, and web domains.

Betting tax:

• Monthly periodicity (payment).
• Taxpayers:
1. Peruvian companies;
2. branches in Peru of foreign companies; and
3. foreign companies not domiciled in Peru.
• Net Win rate 12% (Bets minus prizes).
• After deduction of 2% for maintenance expenses.
• SUNAT (Superintendencia Nacional de Administración Tributaria – Peruvian Tax Authority) administers the tax.
• Deductible for Income Tax.
• Validity of the tax the month following the validity of the Law.

Selective Consumption Tax (ISC – Impuesto Selectivo al Consumo):

• ISC applicable at the time of the bet, on the total amount of the bet.
• The taxpayer of the ISC is the operator, not the customer or bettor.

The regulation of Law No 31557 and its modification Law No 31806

On 13 October 2023, the regulation of the Peruvian Law of Sports Betting and Online Gambling was finally published, approved by Supreme Decree No 005-2023-MINCETUR issued by the regulatory entity, the Ministry of Foreign Trade and Tourism (MINCETUR).

It is a somewhat extensive rule (57 articles and annexes in 92 pages).

With this, we have the end of the vacatio legis of Law No 31557 (modified by Law No 31806) which officially enters into force within 120 days – ie, on 14 February 2024.

Currently, the timeline with the MINCETUR (Peruvian regulatory entity) is as follows.

• First 120 days (from 14 October 2023 to 13 February 2024) – MINCETUR meetings with manufacturers, related service providers, and operators.
• Next 30 days (from 14 February to 13 March 2024) – start of submission of applications to MINCETUR for licences to operate sports betting platforms and online gambling, certification laboratories, registration of suppliers, etc.
• Next 30 days (from 14 March to 13 April 2024) – evaluation period of the regulatory entity MINCETUR to grant licences to exploit platforms.
• Next 90 days (from 14 April to 13 July 2024) – deadline to obtain approval by the MINCETUR regulator of the sports betting and online gambling platforms.