Legal Pathways for Czech Businesses Entering Foreign Gambling Markets

The legal reality of gambling in Europe and the relevant regulation

Gambling is not a free service. It is an activity that states and regulatory authorities monitor strictly. Each EU country—and even each U.S. state—has its own licensing framework, tax regimes, and rules for operators.

The basic principle: Anyone who wants to operate gambling legally in a given country must hold a licence from the relevant state authority. Without a licence, it is illegal activity that leads to criminal liability for both the company and the individuals responsible (management, owners, executive directors). In the Czech Republic, this is the Ministry of Finance under Act No. 186/2016 Coll., on Gambling. In Germany, it is primarily the Gemeinsame Glücksspielbehörde der Länder (GGL). In the United Kingdom, the UK Gambling Commission.

A Czech company has no right to operate gambling in another country without authorisation from the local regulator—even via the internet. The fact that the website is physically hosted on a server outside the Czech Republic does not circumvent this protection. Many countries (including Germany, France, Austria, Belgium) actively block online gambling websites without a local licence and also monitor money flows to their operators.

Tax obligations of a Czech company when operating abroad

This is one of the biggest risks we see in practice. A Czech company is a tax resident based on its registered office or place of management in the Czech Republic. This means its tax liability does not end merely because it carries out activities abroad.

Specifically, this means that gambling income flowing to a Czech company is subject to Czech corporate income tax (rate 21% for 2026), even when the operations are abroad. A Czech company must keep accounting records, file a tax return, and pay taxes also on the basis of foreign income.

If it does not do so properly, the Financial Administration of the Czech Republic may assess tax, late-payment interest, and penalties—often in the tens to hundreds of thousands of Czech crowns. Long-term non-compliance with tax obligations may even lead to criminal prosecution for a tax offence.

At the same time, the Czech company must also comply with the tax laws in the country where it operates gambling. Without proper structuring, it may happen that tax is paid twice on the same income, although double taxation can be mitigated through double tax treaties or credit mechanisms.

Legal obstacles: What stands in the way

This is the first and main obstacle. Regulatory authorities in each country where a Czech company wants to establish itself require a formal licence application, completed background checks on the owners and management, verification of sources of funds, a compliance programme, and consumer protection policies. It is also necessary to provide the platform’s technical specifications, financial guarantees (often several million euros), and liability insurance.

Many countries (Germany, France, Switzerland) have tightened previously less regulated regimes in recent years. As a result, when submitting a new application, a Czech company faces greater competition and stricter scrutiny by the regulator.

Without a local licence, not only is the operation illegal, but there are also no legal counterparties that could contract with the company. Financial flows cannot be legally processed through local bank accounts, player payouts are not legally protected, and the company cannot enforce contractual performance before local courts.

Liability and criminal risks

Operating gambling without a licence is not merely a misdemeanour or an administrative offence; it is often a criminal offence. For example, in Germany it may constitute the offence of “unerlaubtes Glücksspiel” (unauthorised gambling), with penalties including fines up to the amount of the profit and imprisonment. Similar criminal sanctions apply in the United Kingdom and Ireland.

Liability may be borne not only by the legal entity in the form of a fine, but also by individuals in management—managers and owners—with potential personal criminal liability.

Most often, a Czech company is established and acquires only a few players. Over time, however, it is detected by the foreign regulator, followed by an investigation, freezing of accounts, and confiscation of funds. Players complain and may demand refunds, leading to legal disputes that can last for many years.

Attorneys from ARROWS advokátní kancelář have already handled cases where a Czech company’s account was blocked precisely due to suspicion of illegal gambling—and the delays lasted for more than a year.

Obligations related to money laundering (AML/KYC)

From regulators’ perspective, gambling is an attractive target for money laundering and terrorist financing. Each country therefore requires gambling operators to implement KYC (Know Your Customer) to verify players’ identity and the source of their funds, as well as AML (Anti-Money Laundering) to monitor transactions and report suspicious activity. A comprehensive compliance programme is also essential, including regular audits, employee training, and documentation.

A Czech company that implements these obligations incorrectly or not at all exposes itself to regulator fines in the millions of euros, criminal liability of the persons in charge, blocking of bank accounts, and a ban on activity.

In the EU, this regulation is harmonised by directive (including the Fifth AML/CFT Directive), but national implementation differs. Each country adds its own requirements.

GDPR and personal data protection

If a Czech company processes the personal data of players from the EU, it is subject to the General Data Protection Regulation (GDPR). This means data minimisation, collecting only what is strictly necessary, ensuring security through technical and organisational measures, and respecting data subject rights, where players may request erasure of their data. Compliance with the legal bases for processing is also important, as is maintaining records of processing activities (RoPA) and enabling audits.

Breaches of the GDPR can result in fines of up to 4% of the undertaking’s total annual worldwide turnover or EUR 20 million, whichever is higher.

Legal opportunities: Routes to foreign markets

So not everything is prohibited. There are legal and lucrative ways to thrive in gambling markets.

Direct licensing

A Czech company submits a licence application in the target country. This requires legal continuity (the company must be registered in the target country, or at least have a legal entity there), as well as a compliance team and senior management. Financial backing in the form of a deposit or insurance is also necessary, along with approval of the entire process, which typically takes 3–12 months.

The advantages of direct licensing include full control over operations, higher margins, and a stronger market position.

The disadvantages are high initial costs (often EUR 500,000–2,000,000), a lengthy process timeline, and increased regulatory burden.

Example: A Czech software company decided to develop its own online poker platform and wanted to launch it in Romania. It went through a 9-month licensing process and paid approximately EUR 800,000 for compliance, legal, and technical preparations. After approval, it began generating revenue and is now one of the key operators in Romania. However, without the proper legal setup, it would have been blocked within the first months.

Partnership with a licensed operator

A Czech company provides technology, a brand, know-how, or content to a licensed operator in the target country. The operator holds the licence; the Czech company receives a percentage, royalties, or a fee.

This model is often used in practice, especially for the sale of software and technology, white-label solutions, gaming content (live streams, tournaments), and marketing services.

Example: A Czech game studio develops a special slot game with a female theme and offers it to a licensed operator in Italy. The operator has a licence; the Czech company receives a per-play fee or a percentage of profit. The Czech company generates revenue without direct regulatory liability in Italy.

The advantages of this model include lower initial capital, lower regulatory burden, faster market entry, and the ability to diversify through multiple partners and countries.

On the other hand, the disadvantages are lower margins, dependence on the partner, and less control over quality and reputation.

The rules for the partnership structure require that the agreement clearly defines that the partner has all necessary permits. The Czech company must not be involved in operational gambling, and all income must be properly taxed in the Czech Republic. The agreement must also include compliance and audit clauses.

The attorneys from ARROWS can prepare such an agreement and ensure contact with regulators so that the structure is in order.

Affiliate model

A Czech company (or its owner) registers with a licensed gambling operator as an affiliate (partner). The affiliate receives a link used to refer players and generates commission income.

This is the lowest barrier to entry, but also the lowest income. The advantages of the affiliate model include minimal regulatory requirements, low capital expenditure, and flexibility.

The disadvantages are a lack of control over the operator, the possibility that the operator may be sanctioned in the future, and lower overall income. (The affiliate should ensure settlement.)

Important: A Czech company remains tax-liable based on income from affiliate activities. If the income returns to the Czech Republic, it must be declared.

B2B solutions

A Czech technology company develops software, hosting, a payment gateway, compliance tools, or other B2B services for gambling operators. It sells the service to operators, not directly to players.

This model is legally the cleanest, because the Czech company is not a gambling operator but a service provider.

Example: A Czech company develops software to identify problem players (responsible gambling tools) and sells it to ten different operators in Europe. The Czech company generates revenue without direct regulatory liability.

The advantages include minimal regulatory liability, scalability, and the fact that this is not gambling but software. This model often delivers higher margins thanks to the SaaS model.

The disadvantages include the need for a high-quality technological base, competition in the B2B segment, and the necessity of sales and marketing.

Key legal structuring elements require the agreement with the operator to clearly define responsibilities, and the Czech company to have adequate liability insurance for software and data. It is also necessary to ensure that its software does not lead to breaches of regulation, for example if it enabled circumvention of regulatory requirements.

Tax solution for Czech companies operating gambling abroad

A Czech company is a tax resident if it has its registered seat in the Czech Republic (as recorded in the Commercial Register) or if its management or control is in the Czech Republic.

As a tax resident, it is subject to income tax on both domestic and worldwide income, regardless of where it originates.

Gambling income (whether from direct operations, partnerships, affiliate activities, or royalties) is therefore taxed in the Czech Republic.

Alignment with double tax treaties

The Czech Republic has concluded double taxation treaties with many countries (with almost all EU Member States, the USA, Canada, Switzerland, and others). These treaties define in which country tax is paid if double taxation is at risk, and they often grant primary taxing rights to the country where the income is generated. The Czech company can then apply a foreign tax credit in the Czech Republic.

Example: A Czech company has software in Germany and receives royalties. Germany withholds 15%, and the Czech company then reduces Czech tax using a credit. The effective rate may then be around 21% of the share, without double taxation.

However: This works only if everything is properly documented. Without the correct setup, the Financial Administration will take its 21% without a credit, and then the foreign jurisdiction will take its tax as well—resulting in double taxation.

Tax obligations: What must a Czech company file?

A Czech company must file an annual tax return by 31 March, including foreign income. It is also necessary to keep accounting records in Czech, with foreign income properly recorded. For services in the EU, OSS (One-Stop Shop) rules or VAT place-of-supply rules may apply.

In the case of an international group, CbCR (Country-by-Country Reporting) and transfer pricing documentation are also required to demonstrate that income is not being artificially shifted abroad.

The lawyers and tax advisors at ARROWS, a Prague-based law firm, can set up the correct tax framework and ensure that the company meets all obligations and minimizes tax risk.

Read also:

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• CFO Checklist: 7 Legal Traps in Company Structures and Contracts in the Czech Republic
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• Legal Duties and Personal Liability of Managerial Employees in Czechia
• AI governance in companies: How to do it right to avoid legal problems and fines