Tax: What is the tax take?

In the Province of Ontario, an applicant to be the operator of an internet gaming site is required to pay an initial regulatory fee of $100,000 per gaming site. In Ontario, a provider of Software/Gaming-Related B2B goods and services to a registered igaming operator must be registered by AGCO as a GRS. A GRS is required to pay an initial regulatory fee of $3,000 or $15,000, depending on the category of registration. Registrants can select a one or two-year term option, with fees payable to match the length of the term. In addition to the initial fee noted above, an applicant will be required to pay the reasonable costs of an investigation prior to processing of their application. These costs will be levied on an as-required basis, depending on whether additional investigative activities are needed and the intensity and cost of those activities. Thereafter an annual fee of $100,000 per igaming site for operators. For GRSs, an annual fee of $3,000 or $15,000 applies, depending on the category of registration. Operators will also be required to pay additional amounts levied by the AGCO, aimed at offsetting the overall cost of regulating igaming. The specific amounts per operator are yet to be determined; however, the amount could be significantly greater than the annual regulatory fee of $100,000 per gaming site along with investigative charges. ## Licence taxes In Ontario, iGO acts as a conduit between AGCO-registered igaming operators and governmental taxation authorities. Rather than being taxed directly by Canadian/Ontario taxation authorities on revenue generated by their Ontario-facing gaming sites, the operators are required to deposit their gross gaming revenue (“GGR”) from Ontario into a separate bank account and then transfer that GGR to an iGO account. iGO retains 20% of the GGR and pays the remainder back to the operator. Additionally, operators and suppliers may also be subject to a withholding tax depending on the nature of their operations. Normal federal and provincial income taxes may be applicable in the circumstances, as well as sales taxes. A growing number of jurisdictions in Canada impose sales taxes on digital goods and services (commonly referred to as a "Netflix tax"), including online gambling services provided from outside the province and/or country. The provinces of Quebec and Saskatchewan impose sales taxes on digital goods and services (commonly referred to as the "Netflix tax"), including online gambling services provided from outside the province, at a rate of 9.975% and 6% respectively. As well, the federal government began enforcing its own “Netflix tax” on 1 July 2021. As of that date, non-residents selling to Canada must register for the Goods and Services Tax/Harmonised Services Tax (GST/HST) if they sell services or intangibles to Canadian consumers worth more than $30,000 over four calendar quarters. Non-residents will be required to register under a new “simplified” registration system. In Ontario, registered Operators are not responsible to pay any HST. Under the terms of the Operating Agreement, iGO is responsible to pay the HST.