Legal Compliance and Licensing for Gambling Businesses in the Czech Republic

Setting up the correct business model is a crucial step for entering the gambling market, allowing you to avoid high penalties and the rejection of permit applications. In this article, our Prague-based legal team explains how to comply with strict Czech regulations for gambling companies and how to avoid the most common mistakes during the licensing process and subsequent operations in the Czech Republic.

Quick Summary

• Permits are Mandatory: In the Czech Republic, you can only legally operate gambling activities with a basic permit from the Ministry of Finance. Operating without one risks a fine of up to CZK 50 million and website blocking.
• High Financial Requirements: Operators must have equity in the tens of millions of CZK (CZK 30 to 50 million depending on the game type) and provide a security deposit (guarantee). Operating without these resources is not legally possible under Czech law.
• Rules Have Changed: Since 2024, a new gambling tax rate has been in effect, the budgetary allocation of taxes has changed, and conditions for taxing player winnings have tightened (limit of CZK 50,000).
• Intensive Oversight: The Ministry of Finance and the Customs Administration continuously monitor operators. Inspections focus on AML (Anti-Money Laundering), the Register of Excluded Persons (RVO), and the technical parameters of the games.

Legal Framework for Gambling Companies

If you wish to operate gambling activities in the Czech Republic, you must first understand the legal foundations. The primary legislative document is Act No. 186/2016 Coll., on Gambling, which has been effective since January 1, 2017, and has undergone several amendments since then.

The Act clearly defines what constitutes gambling, which types of games are permitted in the Czech Republic, and what the operator's obligations are. To target Czech players, you must hold a basic permit issued by the Czech Ministry of Finance, as the Czech Republic does not automatically recognize foreign licenses.

It is crucial to understand that regulation is constantly evolving. Recent years have seen adjustments in taxation, stricter rules for bonuses and marketing, and updates to technical models for data transmission (AISG). Our Prague-based attorneys handle these changes daily and can guide you through all requirements to ensure your gambling company model remains compliant with Czech legislation.

Permitted Types of Gambling Activities

In the Czech Republic, it is only possible to operate types of gambling activities exhaustively defined by law. The main forms include:

• Odds Betting – betting on sports and social events (both live and pre-match).
• Technical Games – the legal term for "slot machines," electromechanical roulette, and random number generators in an online environment.
• Live Games – classic casino games involving a dealer (roulette, blackjack, poker).
• Lotteries and Bingo – numerical lotteries, instant lotteries (scratch cards).
• Small-scale Tournaments – a specific category primarily for poker tournaments with lower buy-ins.

Each of these types is subject to different rules, capital requirements, and gambling tax rates. Technical games carry a higher tax rate of 35% compared to odds betting, which is subject to a 30% rate.

In practice, your business model may involve operating multiple types of games simultaneously, such as a sportsbook combined with an online casino. This requires your basic permit to cover all these game types, and you must maintain separate records for correct taxation under the Czech legal system.

MicroFAQ: Basic Concepts and Game Types

1. Can I operate gambling activities from abroad for Czech players?
Only if you obtain a Czech permit. An entity based in the EU/EEA can apply for a permit but must meet all conditions of the Czech Gambling Act, including depositing a security and connecting to state information systems.

2. Do rules differ for online and land-based gaming rooms?
Yes. For online operations, you need a basic permit from the Ministry of Finance. To operate a physical gaming room or casino, you additionally need a permit for the placement of the gaming space, issued by the local municipal authority.

3. Can I choose which games to operate?
Yes, but only from those permitted by law. You cannot operate games that do not meet the definitions of Act No. 186/2016 Coll. Each type of game must be approved during the licensing process.

Phase 1: General Eligibility for a License

If you want to become a gambling operator, your journey begins with verifying whether you meet the eligibility conditions. The law requires fulfillment of so-called general conditions for operating gambling activities.

You must be a legal entity with a registered office in the Czech Republic or another EU or EEA member state. The company's organizational structure must be transparent so that the state knows who the ultimate beneficial owner is.

Furthermore, you must demonstrate integrity and no outstanding debt. Integrity is proven by a criminal record extract for the company and all members of its statutory bodies. No outstanding debt means you have no recorded arrears with the tax authorities, customs administration, social security, or health insurance in the Czech Republic.

Financial stability is key. An operator must have equity of CZK 30 million for odds betting and live games, or CZK 50 million for technical games and lotteries. The origin of these funds must be transparent and verifiable.

A common mistake occurs when companies have a technical solution but underestimate the financial and corporate structure. The Ministry of Finance will reject an application if the origin of capital is not entirely clear. ARROWS assists clients in preparing an auditable structure before the application is submitted.

MicroFAQ: General Eligibility

1. Do I need a Czech branch?
A foreign entity (from the EU/EEA) does not have to establish a new Czech company but must set up a branch office in the Czech Republic or have a representative for service of process. Most importantly, it must be registered for Czech gambling tax.

2. What happens if I have social security debts?
You will not obtain the license. Being debt-free is an absolute requirement. Everything must be paid before the application is submitted.

3. Is equity of CZK 50 million sufficient?
To meet the legal limit, yes. However, for actual operations and marketing costs, your business plan should be more robust.

Phase 2: Licensing Process and Permits

The licensing process for issuing a basic permit is an administrative procedure that demands high detail and precision. The Ministry of Finance has a statutory deadline for the decision, but due to interruptions for supplementing documentation, the process in practice takes 6 to 12 months.

The application must include:

• Documents proving integrity and no outstanding tax or social security debts.
• A detailed game plan (game rules, winnings, limits).
• Professional assessment and certification of the operational capability of the technical equipment.
• Proof of a security deposit (guarantee) ranging from CZK 5 to 50 million.

In practice, companies often underestimate the preparation of the game plan, which must be absolutely precise and in full compliance with Czech law. Our Prague-based attorneys regularly prepare game plans to meet the requirements of the Ministry of Finance officials and prevent the rejection of applications.

Client identification and Anti-Money Laundering (AML)

The obligations do not end with obtaining a license; they are just beginning. Player identification and registration are the fundamental pillars of the Czech Gambling Act and the Anti-Money Laundering (AML) Act.

Every player must undergo a registration process that includes identity verification (KYC), most commonly via BankID or by uploading documents. Anonymous online gambling is strictly prohibited in the Czech Republic, and every player must complete the identity verification process.

As an obliged entity, you must perform customer due diligence. You must monitor transactions and, in case of suspicion of money laundering (e.g., deposits not corresponding to the player's economic situation), file a Suspicious Transaction Report (STR) with the Czech authorities.

Failure to comply with AML obligations can lead to fines from the Financial Analytical Office. Non-compliance with AML duties can result in fines in the range of millions of Czech korunas from the Financial Analytical Office.

MicroFAQ: Identification and AML

1. When must I verify a player?
During the registration of a user account. A player may have a so-called temporary account with deposit limits, but for full gameplay and withdrawals, they must be fully identified.

2. Do I need to determine the source of funds?
Yes, as part of enhanced customer due diligence (e.g., for politically exposed persons or in the case of high deposits), you must ascertain the source of wealth and funds.

3. Can I use a third party for verification?
Yes, Czech law allows reliance on a third party (e.g., a bank via BankID), but the ultimate responsibility for the accuracy of the verification always lies with the operator.

Register of Excluded Persons

A crucial part of player protection is the Register of individuals excluded from participation in gambling (RVO). This system is managed by the Czech Ministry of Finance.

The register includes persons receiving material distress benefits, those in bankruptcy, or those with a court-ordered gambling ban. It is your duty to verify whether a person is listed in the register every time a player logs in online or enters a gaming room.

If a person is in the RVO, you must not allow them to participate in the game. This verification is performed automatically via the Ministry of Finance's API. Ignoring this obligation is one of the most serious offenses, with fines of up to CZK 50 million.

Since 2024, the process for voluntary entry into the RVO has been simplified, which increases the emphasis on the 100% functionality of your control mechanisms.

Regulation of gambling advertising

Gambling advertising is strictly regulated by the Act on the Regulation of Advertising in the Czech Republic.

Every advertisement (banner, TV spot, social media post) must contain mandatory elements. Every advertisement must include a notice prohibiting participation by persons under 18 and a warning from the Ministry of Finance regarding the risk of addiction.

This warning must be clear and sufficiently large. Furthermore, advertising must not target minors and must not create the impression that gambling is a way of making a living or a solution to financial problems.

It is prohibited to promote illegal operators, and violations of this rule carry heavy fines.

Table of Risks and Solutions

Obligations after obtaining a license

Work does not end with obtaining the license. You must establish remote access for supervisory authorities and send daily data packages regarding all bets and winnings to the Ministry of Finance system (AISG). Reporting is governed by Decree No. 208/2017 Coll.

Gambling tax rates changed as of January 1, 2024. The tax rate is 35% for technical games and lotteries, while a rate of 30% applies to fixed-odds betting and live games.

Since 2024, there is also an obligation to tax player winnings. If a player's net winnings from one type of gambling exceed CZK 50,000 per calendar year, they are subject to withholding tax or must be declared in the player's tax return.

Supervision and inspections of operators

Supervision is carried out by the Customs Administration of the Czech Republic and the Ministry of Finance. Inspections can be physical or remote in the online environment.

The Customs Administration has the authority to conduct "control purchases" (mystery shopping), where an officer poses as a player. In this way, they verify whether registration is taking place, whether the RVO check is functioning, and whether the rules of the game are being followed.

How to avoid the most common mistakes

• Mistake 1: Underestimating the source of capital. The Ministry of Finance investigates in depth where the money for share capital and the security deposit comes from. Unverifiable loans lead to rejection.
• Mistake 2: Misunderstanding the Game Plan. The game plan is a binding document. If your software operates differently than described in the plan, you are violating Czech law.
• Mistake 3: Insufficient AML. Relying on the idea that "it won't be noticed" is risky. The FAU has sophisticated analytical tools.
• Mistake 4: Marketing without rules. Omitting warning texts in social media advertising is an easy target for inspectors.
• Mistake 5: Ignoring legislative changes. Tax and technical regulations change. Having a lawyer to monitor legislative updates is a necessity.

International dimension of business

If your company is planning an expansion, keep in mind that there is no single "EU license" in the gambling sector. Germany, Poland, Slovakia – each country has its own specific legislation and requires a local license. ARROWS International can assist you with the coordination of legal services across these jurisdictions.

Conclusion

Setting up a business model for a gambling company requires precise legal and technical preparation. While the risks of sanctions are high, the Czech market offers a stable and regulated environment for well-prepared companies.

ARROWS law firm in Prague will help you prepare a complete legal strategy, from company formation to setting up compliance. Contact us at office@arws.cz.

FAQ – Frequently Asked Legal Questions

1. How long does it take to obtain a license?
Realistically, expect 6 to 12 months from the start of document preparation until the permit is issued. Although the administrative proceedings have statutory deadlines, these are suspended every time a request for additional information is made.

2. Can I operate an online casino without a physical branch?
Yes, if it concerns technical games or online odds betting. You do not need to have brick-and-mortar gaming rooms. However, you must have a registered office or a branch office and a contact person in the Czech Republic.

3. What happens if I do not verify a player in the RVO (Register of Excluded Persons)?
You are committing an administrative offense for which a fine of up to CZK 50 million may be imposed under Czech law. Systematic bypassing of the RVO can lead to the revocation of your license.

4. What are the most common reasons for rejecting an application?
Failure to prove debt-free status, unclear origin of funds (capital), errors in the game plan, or technical deficiencies identified by the testing laboratory.

5. Do I need to have servers in the Czech Republic?
Czech legislation requires that the server where data for state supervision is stored be located in an EU/EEA member state. It is not necessary for it to be physically in the Czech Republic, but remote access for Czech authorities must be ensured.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue. Although we strive for maximum accuracy, legal regulations and their interpretation evolve over time. To verify the current wording of regulations and their application to your specific situation, it is essential to contact our Prague-based law firm directly.

Read also:

• Operating Without a Licence in the Czech Republic: Legal Consequences Explained
• How to prepare for administrative proceedings at the CNB: Legal and documentation minimum
• Compliance audits: How to conduct an internal audit before the authorities arrive
• GDPR inspections in practice: how investigations by the Office for Personal Data Protection are conducted
• Holding Structures and Beneficial Ownership in the Czech Republic: Compliance Checklist