Legislative framework of gambling regulation
◊ Status: Law stated as at 01-Sep-2016 | Jurisdiction: Turkey
The legal definition of “gambling” in Turkey is set out in the Turkish Criminal Code and any act that falls within this definition is prohibited (see Question 2, General definition). In addition, roulette, pinball and slot and other similar gaming machines are classified as special forms of gambling and are banned under the Law Regarding Roulette, Pinball and Gaming Machines. The Turkish Code of Obligations governs the issues of enforceability of gambling and betting debts, and the collection of lottery and games of chance receivables.
In Turkey, certain forms of gambling, although not defined as such by law, are classified as regulated gaming and betting. These include games of chance (Şans Oyunları) and betting (Müşterek Bahis). Therefore, the answers provided in this article will also cover regulated games of chance, sports betting and horse race betting played for cash.
Games of chance and betting are regulated and operated by Turkish government agencies under separate legal rules:
- Games of chance are governed by the:
- Decree No. 320 regarding National Lottery Administration;
- Regulation on Supervising Games of Chance.
- Sports betting is governed by the:
- Law Regarding Soccer and Other Sports Betting;
- Sports Betting Regulation.
- Horse race betting is governed by the:
- Law Regarding Horse Racing;
- Horse Race Betting Regulation.
Other laws applicable to regulated gaming and betting include the:
- Law Regarding Taxes, Funds and Public Charges Levied Upon Gaming.
- Consumer Protection Law.
- Electronic Communications Law.
- Law Regarding Internet Broadcasting and Combatting Criminal Offences Committed via Internet Broadcasting.
- Law on Prevention of Laundering Proceeds of Crime.
Secondary legislation to the above should also be noted as applicable.
Definitions of gambling
Gambling (Kumar). The Criminal Code defines gambling as games played for a gain where profit or loss depends on chance.
Games of chance (Şans Oyunları). The Regulation on Licensing and Supervising Games of Chance defines games of chance as games played for a cash prize (such as lottery, numeric games and instant-win games). The law defines three categories of games of chance:
- Lottery (Piyango). This is a game of chance played by numbered raffle tickets which represent a chance to win a pre-determined cash prize on a given drawing date.
- Numeric games (Sayısal Oyunlar). These are games of chance played by guessing at the outcome of a draw of certain number of shapes, letters or numerals to win a cash prize.
- Instant- win games or sweepstakes (Hemen-Kazan). This is a game of chance played by scratching off tickets to uncover certain number of identical numbers, amounts, shapes, designs (or alike) to win a cash prize.
Sports betting (Müşterek Bahis Oyunları). The Sports Betting Regulation defines sports betting a game played by betting on the outcome of a local or international sports event with the possibility of winning a pre-determined percentage of the revenue (hasılat) raised as the prize.
Horse race betting (Müşterek Bahis). The Horse Race Betting Regulation defines horse race betting as a game of chance and skill played by betting on the outcome of any kind of local or international race, competition, sports event or certain event or position with the possibility of winning a pre-determined quantity, amount, rate or multiple of the revenue (kazanç) raised as the prize.
The legal definitions for other regulated games, lotteries and raffles played for non-cash prizes are as follows:
- Social games (Talih Oyunları). The Regulation on Licensing and Supervising Games of Chance defines social games as games played by tokens, chips or cash with a gaming tool against a terminal or with a gaming machine.
- Non-cash lotteries and raffles (Karşılığı Nakit Olmayan Piyangolarve Çekilişler). The Regulation on Non-Cash Lotteries and Raffles defines three categories of non-cash raffles:
- charitable raffle (Yardım Amaçlı Piyango). This is sale of a ticket, coupon or similar for value that represents a chance in a lottery to be held according to the Charitable Fundraising Law (Yardım Toplama Kanunu);
- commercial raffle (Ticari Amaçlı Piyango). This is giving away free tickets, coupons and numbers representing a chance to win a lottery held with the purpose of promoting a good or service or increasing its market share;
- social raffle (Sosyal Amaçlı Piyango). This is a lottery by public organisations for the purposes of benefiting the community.
Apart from the general definition of gambling (see above, General definition), there is no stand-alone definition for online gambling. Any form of gambling (whether land-based or online) is prohibited.
The regulations governing games of chance and betting define the word “online” (sanal ortam) as online platforms used for operating games of chance and betting. The legal definition of “online” includes internet, mobile telephone, interactive TV and similar electronic platforms.
Apart from than the general definition of gambling (see above, General definition), there is no stand-alone definition for land-based gambling. Any form of gambling (whether land-based or online) is prohibited.
The regulations governing gaming and betting define the phrase “land-based dealer” (sabit bayi) as registered work places used for regulated games of chance, social games, sports betting and horse race betting.
- Lotteries, games of chance and social games and regulated by the Ministry of Finance and the National Lottery Administration (Milli Piyango İdaresi)
- Sports betting is regulated by the Ministry of Sports and the Spor Toto Association.
- Horse race betting is regulated by the Ministry of Agriculture and the Turkish Jockey Club.
See box, The regulatory authorities.
Poker is classified as gambling and is therefore prohibited.
Any form of betting other than regulated sports betting and horse race betting is classified as gambling and is prohibited.
This is regulated and exclusively operated by the Spor Toto Association. Spor Toto and İddaa are the legally identified sports betting games operated by the Spor Toto Association through its authorised dealers who are issued a permit by the Spor Toto Association.
Horse race betting
This is regulated and exclusively operated by the Turkish Jockey Club. Ganyan, plase and bahis are the legally identified sports betting games operated by the Turkish Jockey Club through its authorised dealers who are issued a permit by the Turkish Jockey Club.
Casino games are classified as gambling and are therefore prohibited.
Slot and other machine gaming
Slot and other machine gaming is classified as gambling and is therefore prohibited.
The regulations governing games of chance and betting define the word “terminal” as a land-based or electronic platform for regulated games of chance.
Bingo is classified as gambling and is therefore prohibited.
Lotteries in Turkey are regulated and allowed under a licence that is currently issued to the National Lottery Administration. The national lottery (Milli Piyango) is the legally identified lottery game operated by National Lottery Administration through its authorised dealers, who are issued a permit by the National Lottery Administration.
Numeric games are regulated and allowed under a licence currently issued to the National Lottery Administration. Sayısal loto, super loto, şans topu and on numara are the legally identified numeric games operated by National Lottery Administration through its authorised dealers, who are issued a permit by the National Lottery Administration.
Instant-win games are regulated and allowed under a licence currently issued to the National Lottery Administration. Hemen-Kazan or kazı kazan is the legally identified instant win game operated by National Lottery Administration through its authorised dealers, who are issued a permit by the National Lottery Administration.
Any form of gambling (whether land-based or online) is prohibited. The regulated forms of gaming and betting (that is, games of chance, sports betting and horse race betting) are operated directly by the specific Turkish public operator affiliated with the Turkish government agency regulating the activity. However, there is only one licensing regulation in force, which applies to the operation of games of chance. Presently, the operation of games of chance in Turkey is licensed to the National Lottery Administration. A new licence for operating games of chance in Turkey is currently up for privatisation by the Privatization Administration (Özelleştirme İdaresi Başkanlığı). The related deadlines in relation to licensing are as follows:
- Pre-qualification application deadline: 4.00 pm on 14 October 2016.
- Deadline for changing partners of a joint venture: 4.00 pm on 27 October 2016.
- Deadline for tender: 4.00 pm on 8 November 2016.
For the eligibility criteria for the licence tender, see below, Eligibility.
In addition, all dealers (that is, entities that offer games) active on land-based, online, interactive or electronic platforms of games of chance, sports betting and horse race betting must be issued with a permit for their operations. Both real persons and legal entities can apply for a dealership permit. The main eligibility criteria for dealers are as follows:
- Turkish nationality and residence.
- Clean criminal record.
- Tax registration.
- Dedicated employee.
- Dedicated land-line and mobile phone line.
- Security deposit.
- Minimum of 25 square-meter area furnished with LCD TV.
- Computer with internet access and live broadcasting of scores.
- If applicable, an online or electronic platform infrastructure.
The eligibility criteria for the licence tender for operating games of chance in Turkey are set out below.
General criteria. Only legal entities and joint ventures (JVs) can participate in the licence tender (however, real persons and private equity funds can participate as JV partners). The requirements for entities and JVs are as follows:
- Private equity funds must have a portfolio of assets worth US$500 million, with a limit of 70% shareholding in the joint venture.
- Legal entities must be solvent, have a clean criminal record, not have been blacklisted from public tenders during the past five years and must not hold participation (voting) shares in a blacklisted, restricted or limited legal entity. Legal entities must have a minimum paid-up capital of TRY5 million and have a transparent shareholding structure.
Financial pre-qualification criteria for bidders (excluding private equity portfolio). The total assets of a bidder (excluding their private equity portfolio) for 2015/16 must be at least US$250 million. The total shareholders’ equity of a bidder for 2015 to 2020 must be at least US$150 million.
Technical pre-qualification criteria for bidders. These requirements are that:
- A shareholder of a bidder (whether a legal entity shareholder or JV partner) holding at least 10% of the shares must have the following experience (obtained during the seven years prior to the announcement of the tender):
- has operated games of chance under a licence with a single license agreement for a minimum period of two years over a games of chance system consisting of a network of at least 2,000 terminals;
- has organised at least one online game of chance over the game of chance system; and
- realised at least US$2 billion revenue out of online and land-based games over a period of two years.
- The bidder, if successful, must sign an operation procurement agreement with an eligible operator satisfying the above criteria.
To apply to be a bidder in the games of chance licence tender, the bidder must:
- Sign a confidentiality undertaking.
- Pay a non-refundable US$5,000 deposit to obtain the information memorandum and tender specifications.
- Pay an additional US$20,000 deposit and access the Privatization Administration data site to verify their general and technical qualifications for the previous five years.
- Submit their financial and technical pre-qualification applications, which will be assessed by the Privatization Administration within three business days.
- Submit a surety bond of US$10 million.
Qualified bidders must submit their bids in accordance with the technical specifications.
Duration of licence and cost
The duration of the games of chance licence is ten years. The tender will be carried out through a bargaining process and will be completed by public auction.
A games of chance licence holder is prohibited from engaging in any of the following:
- Partially or fully assigning or transferring the licence.
- Any type of fraudulent or dishonest act.
- Forgery in security bonds.
- Fraud and dishonest behaviour in gaming and betting.
- Advertising and promotional activities against public order and morals of the society.
- Carrying out advertising and promotional activities that could mislead consumers and/or targeting young persons below 18 years of age.
- Allowing young persons below 18 years of age to participate in games of chance and be paid prizes.
- Promoting illegal games.
- Allowing unauthorised persons to sell games of chance tickets.
- Underreporting or attempting to underreport gaming revenue.
- Misappropriating gaming tickets by engaging in money laundering activities.
- Offering social games online and on other electronic platforms.
The following persons are banned from participating in games of chance:
- License holders.
- Shareholders, board of directors and executives (having representation power) of legal entities which own 10% or more of the shares of the operators (including their spouses and children).
In horse race betting, jockeys and apprentice jockeys are prohibited from participating in gambling games. Jockeys, apprentice jockeys, trainers and hostlers are prohibited from publicly sharing predictions via print and visual media channels.
Anti-money laundering legislation
Obliged persons. The following persons are listed as “obliged persons” and are responsible for verifying customer identification and reporting suspicious activities to the Financial Crimes Investigation Board (Mali Suçları Araştırma Kurulu) (MASAK) (Law on Prevention of Laundering Proceeds of Crime):
- The licence holders of social gaming, lottery and betting games. This includes the National Lottery Administration, Spor Toto Association and the Turkish Jockey Club.
- Real persons and legal entity operators and dealers authorised by the license holders.
Verifying customer identification. Obliged persons must identify their customers (by verifying their identification information) when the amount of prize won as a result of a lottery draw, game of chance or betting amounts to or more than TRY20,000.
Reporting suspicious activity. The legal definition of “suspicious activity” is a transaction where there is information, suspicion or reasonable grounds to suspect that the asset subject to the transaction carried out (or attempted to be carry out) through the obliged parties was:
- Acquired by illegal means.
- Used for illegal purposes within the scope of terrorist activities.
- Used by a terrorist organisation, terrorists, or those who finance terrorism.
Turkish law requires obliged parties to report suspicious transactions to the MASAK, regardless of the transaction’s monetary value. When faced with a suspicious transaction, the obliged party (or its legal representative, in the case of a legal entity) must report it to the MASAK within ten business days. Obliged parties must not disclose any reporting activity to third parties, including the parties to the transaction, except for MASAK inspectors and the court, when requested to produce such documents during trial.
Any form of gambling (whether land-based or online) is prohibited. The licence for operating regulated games of chance applies to land-based games and games administered online, games on interactive TV and on electronic platforms (see Questions 5 and 6).
In addition, the Regulation on Horse Race Betting provides that the Ministry of Agriculture can authorise the racing operator, the Turkish Jockey Club, to administer online betting games. Turkish Jockey Club has been the sole operator for land-based and online horse race betting permit since 3 October 1953.
The limitations for online gambling are the same as for land-based gaming (see Question 6). In addition, operating and advertising social games online, on interactive TV, mobile phones and similar electronic platforms are prohibited.
See Question 6, Restrictions.
Anti-money laundering legislation
See Question 6, Anti-money laundering legislation.
B2B and B2C
Any form of gambling (whether land-based or online) is prohibited.
Under Turkish legislation, there is no distinction between the applicable rules for business to business (B2B) and business to customer (B2C) operations of licence holders, operators and their dealers that offer regulated gaming activities (online games of chance, online sports betting and horse race betting games).
The following forms of technical measures are available to protect consumers (Law Regarding Internet Broadcasting and Combatting Criminal Offences Committed via Internet Broadcasting):
- Access blocking via domain name, IP address, content (URL) blocking and other similar methods.
- Removal of content (URL) from servers by content providers and online and electronic platform providers.
- Blocking access to a website.
Mobile gambling and interactive gambling
There is no distinction is made in Turkish law for interactive or mobile gambling. Any form of gambling (whether land-based or online) is prohibited.
According to the legislation regulating games of chance and betting, the rules governing games of chance, sports betting and horse race betting apply to any such games administered online, on interactive TV, mobile phones and other electronic platforms.
Social games are defined as games played by tokens, chips or cash with a gaming tool against a terminal or with a gaming machine (Regulation on Licensing and Supervising Games of Chance)
Social games were operated by tourism and entertainment facility operators under permits issued by the Ministry of Tourism until 2005, when the new regulation, the Regulation on Certification of Tourism Facilities dated 21 June 2005 abandoned the section on social games and the procedure of issuing social gaming permits.
At present, social games seem to appear in statute (Decree No 320 of National Lottery Administration and the Regulation on Licensing and Supervising Games of Chance). Such games are, by definition, not allowed to be operated, advertised or promoted online via computer, internet, interactive TV and mobile phones.
An unregulated category of games is the digital games offered free of charge on interactive TV, internet, mobile phones and other electronic platforms. Digital games are allowed provided the games’ form does not fall into the legal definition of social games and gambling or into the category of classified gambling products.
In Turkey, gambling debts are not enforceable and therefore cannot be pursued. Commercial paper and/or negotiable instruments issued (even if endorsed) in lieu of a gambling or betting debt cannot be enforced. The law reserves the rights of third parties who receive and possess such negotiable instruments in good faith.
Regulated games of chance and betting receivables
In Turkey, regulated games of chance and betting receivables can be enforced and collected. Unauthorised games of chance and betting receivables (including international games and bets), are treated as gambling debt and are not enforceable.
Any form of gambling (whether land-based or online) is prohibited.
Prizes won in regulated games of chance, such as lottery, numeric games and instant-win games and social gaming operated by the National Lottery Administration, are exempt from taxes, levies and charges.
Sports betting and horse race betting revenues and cash or in-kind prizes won in sports and horse race betting and non-cash lotteries and raffles are subject to gaming tax (ŞOV), value added tax (VAT), special consumption tax (ÖTV), income tax and inheritance tax (see below Taxation of gaming and betting operators).
Taxation of gaming and betting operators
Regulated gaming and betting revenues operators are taxed as follows:
Gaming tax. The gaming tax base is the revenue derived from authorised gaming and betting activities. The Law Regarding Taxes, Funds and Public Charges Levied Upon Gaming defines “revenue” as the total amount collected from gaming and betting players less the applicable VAT. Tax liability is imposed on the gaming and betting operator and its licensees and dealers. The gaming tax rates are as follows:
- for sports betting: 5%;
- for horse race betting: 7%;
- for games of chance: 10%.
Gaming tax is declared in the tax declaration and must be paid by the 20th day following the end of the respective taxation period. Gaming tax is not qualified as a deductible expense or as an expense item in the calculation of personal and corporate income tax.
- VAT. Turkish law imposes VAT upon any type of games and bets. Tax liability is imposed on game or bet participants. The VAT base is the sum of both the participation fees and the platform access fees (whether land-based or online). The applicable rate of VAT for gaming and betting is 18%. VAT is declared quarterly in tax declaration and must be paid by the 24th day following the end of the respective taxation period.
- Income tax. All income derived from commercial and industrial activities is considered commercial income and is subject to income tax. Tax liability is imposed on gaming and betting operators and their licensees and dealers. The rate of corporate income tax is 20%.
The rate of personal income tax is between 15% to 35%, calculated based on income thresholds announced each year.
Income tax for a calendar year is declared in the tax declaration and payable until 25 March the following year.
The taxation of cash and non-cash prizes won in regulated gaming, betting, non-cash lotteries and raffles is as follows:
- Inheritance tax. Cash and non-cash prizes won in games, bets, lotteries and raffles with a value exceeding the qualified deductible for the respective year are subject to 10% inheritance tax. Inheritance tax is withheld by the gaming or betting operator at the time of payment (the qualified deductible for 2016/17 is TRY3,918. The qualified deductible is the cash or non-cash prize value that is exempt from tax. Any cash, non-cash prize value exceeding the qualified deductible amount is subject to inheritance tax).
- VAT. VAT law imposes value added tax upon non-cash prizes won in games, bets, lotteries and raffles. Tax liability is imposed on game or bet participants receiving non-cash prizes. The VAT base is the value of the non-cash prize. The applicable rate of VAT to non-cash prizes is 18%. VAT is withheld by the gaming or betting operator at time of receipt of the prize.
- Special consumption tax. The ÖTV Law imposes a special consumption tax on non-cash prizes won in games, bets, lotteries and raffles. Tax liability is imposed on game or bet participants who receive non-cash prizes. The tax base is the value of the non-cash prize. The rate of special consumption varies by the non-cash prize (for example, whether the prize is a vacation, car, durable goods, toy and so on). The applicable rate for particular goods should be checked from the ÖTV rate lists, which are periodically updated and appended to the ÖTV Law by the Turkish Revenue Administration (Gelir İdaresi Başkanlığı). Special consumption tax is withheld by the gaming or betting operator at time of receipt of the prize.
Any form of gambling (whether land-based or online) is prohibited. Cash or in-kind prizes won by Turkish citizens through gambling activities abroad or online on websites administered by foreign operators are considered a “gain without consideration” (ivazsız kazanç) and are subject to inheritance tax.
The following rules are applicable to inheritance tax for online gambling:
- Cash or non-cash prizes won that exceed the qualified deductible for the respective year are subject to 10% inheritance tax.
- The individual must declare and pay the required inheritance tax by filing an inheritance tax declaration within one month from the date of receiving the prize. (the qualified deductible for 2016/17 is TRY3,918).
Any form of gambling (whether land-based or online) is prohibited. Any advertising, promotions, sponsorship or other public relations activities related to regulated gaming and betting must not:
- Violate public order or be against the morals of society.
- Temp bad habits and dependency on gaming.
- Include any banned text, logo or similar signs.
- Mislead consumers as to winning conditions, prizes and participation fees.
- Target young persons under 18 years of age.
- Promote gaming as an alternative means to generate income.
- Discriminate based on ethnicity, race, nationality, religion, age and gender.
- Involve violence and sexual abuse.
- Promote substance abuse and illegal acts such as gambling.
Gaming operators must openly announce a gaming age limit of 18 years of age and must seek written verification from each participant as to his/her eligibility.
Gaming operators and their authorised dealers and representatives (both real persons and legal entities) are prohibited from calling or sending phone messages, fax, letters, electronic mail or similar communications to persons other than their members in order to promote participation in games and bets.
Any form of gambling (whether land-based or online) is prohibited. For the rules relating to the advertising of regulated gaming and betting, see above, Land-based gambling.
Developments and reform
The legal status of land-based gaming and online gambling has not changed significantly in recent years.
There are no significant short-term or long-term developments or reforms planned for land-based, online or social gaming.
*The author would like to thank Mr Dinc Uner and Ms Emine Eser for assisting in compiling the legislative texts.
The regulatory authorities
Ministry of Finance
Description. Principle regulator of the legislation applicable to lottery, games of chance and social games.
National Lottery Administration
Description. Licensee for games of chance and social games. Responsible for developing, promoting and operating games of chance, preparing game plans, issuing permits to dealers and supervising compliance with gaming legislation.
Ministry of Sports
Description. Principle regulator of the legislation applicable to sports betting.
Spor Toto Association
Description. Operator for sports betting. Responsible for developing, promoting and operating sports betting games, building the necessary infrastructure and organisation, issuing permits to dealers, and supervising compliance with sports betting legislation.
Ministry of Agriculture
Description. Race authority and principle regulator of the legislation applicable to horse race betting. Approves horse race betting games and online race betting.
Turkish Jockey Club
Description. Racing administration and operator for horse race betting. Responsible for developing, promoting and operating horse race betting games, issuing permits to dealers, accepting sponsorships for annual races and supervising compliance with horse race betting legislation.
Mevzuat Bilgi Sistemi (Legislative Information System) (LIS)
Description. Official website maintained by the Prime Ministry, General Directorate of Legislation and Publication. The main duties of the General Directorate are:
- Collecting and publishing legal texts in the LIS.
- Eliminating the repealed legislative text from the LIS.
- Publishing the Official Gazette.
- Updating the LIS daily.
- Consolidating the legislative updates in a single text.
The LIS is free and allows easy access. It is offered in the original Turkish lang
Source: Practical Law