Confirmation Rules for Income Sources of Founders of Betting Companies to Change in 2021

The Russian government has issued a new version of the resolution specifying how founders of betting or tote betting facilities will confirm the source of funds used to form the registered capital of the betting company.

The revised edition of rules was approved by the resolution as of August 31 this year. It will come into effect on January 1, 2021.

What is the main distinctive feature of the new version of the resolution? What general provisions does the document contain? Read about all of it below.

New version of the resolution: main change

The version of the resolution that will be valid until the end of the year outlines that the confirmation of income sources is not required in three cases:

1. If the registered capital increases to the amount that exceeds the minimum level of registered capital set by the Russian law for gambling organizers.
2. If the founder purchases shares of the registered capital from one of the founders of the betting company, or if he receives shares by way of succession in the result of restructuring of shareholders.
3. If the registered capital increases due to the company’s property.

According to the new version of the resolution, specified exceptions will be cancelled the next year. In such a way, after the resolution comes into effect, founders will be obliged to confirm the source of funds used to pay the registered capital including in the abovementioned cases.

General provisions of the resolution: main clauses

According to the resolution, founders of betting companies will have the right to use only personal income to pay the registered capital, the source of which they can confirm by documents. The use of borrowed money for this purpose is forbidden.

The Federal Tax Service will review applicants’ papers, conduct an audit and determine the source of funds used to pay the registered capital by founders. Specifically this body will make sure that third party funds are not used to pay the registered capital of companies that specialize in betting or tote betting.

About confirmation of personal income

To confirm the fact that money added by the individual to the registered capital of the betting company was part of his personal income, one has to submit the following documents to the Federal Tax Service:

• A certificate specifying from what sources the individual received the money. It must be certified by the signature of the person submitting the documents;
• Copies of documents proving that income of the individual was obtained specifically from the sources outlined in the documents. They must be certified by this individual or the organization that issues them;
• A copy of document specifying that money intended to pay the registered capital was truly transferred to the settlement account of the betting company;
• Bank statement confirming that money was credited as intended.

To pay the registered capital, the individual can use the money earned both in Russia and abroad. It is not necessary to inform the controlling body about all the earned money. At the same time, the funds used by the individual to buy shares of the registered capital of the gambling company cannot be considered as his income if the right to dispose of these funds is restricted by the federal law or a corresponding agreement.

Founder of a betting company will be able to determine independently for what uninterrupted period to provide a report. For example, he can submit to the Federal Tax Service income data for 2 or 10 years. The main thing is that the year that precedes the submission of documentation to the controlling body has to be included in the specified period.

The important nuance stipulated by the resolution is connected with the fact that the following sums are deducted from the total income of the individual for the specified period:

• the amount of paid taxes;
• funds that the individual has to pay as fines;
• amount of investments in shares of the companies that are liquidated, bankrupt, or in receivership;
• volume of expenditures of the individual during the reporting period. Here, information from the tax statement is taken into account;
• the sum of credit obligations.

According to the governmental resolution, if the total sum the applicant adds to the registered capital of the betting company does not exceed his income in the specified period (taking into account all deductions), it will be a confirmation of the fact that borrowed money was not used.

About confirmation of income of legal entities

A legal entity can also act as a founder of the company that organizes betting or tote betting activities. In this case, to confirm the source of funds used to pay for the share in the registered capital, the legal entity will have to submit the following documents to the tax service:

• calculation of net asset value. The document has to be signed by the company’s executive or his authorized person and certified by seal (if available);
• a copy of payment document specifying that the legal entity paid for the registered capital of the gambling company;
• bank statement confirming that funds were credited.

The resolution also stipulates that net asset value of the legal entity, which is a resident of the Russian Federation, is calculated in accordance with normative legal documents that determine the evaluation procedure for the company’s net worth.

If the legal entity is not a resident of the Russian Federation, the Federal Tax Service can request to submit data on the method the company used to calculate net assets.

About other peculiarities of betting activity regulation

The law that toughens requirements to betting activities in Russia will come into effect at the end of September of 2020.

In particular, betting companies will be able to accept bets only on sports events. Besides, double licenses will be prohibited. In other words, holding one license, a bookmaker will be able to accept bets solely on the outcome of sports competitions. A tote betting license will allow accepting bets only on horseracing.

Besides, according to the new requirements, betting license can be abolished if the operator does not pay purpose-oriented deductions or does not conduct activities within half a year.

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You can read more about the main provisions of the new law here >>>