How to obtain a Tobique gaming license?

Introduction 

Tobique is an Indian reservation in Canada, in the province of New Brunswick (similar to Kahnawake). 

The Tobique First Nation has the right to self-government under section 35(1) of the Constitution Act of Canada, 1982. On October 13, 2023, the Tobique First Nation established a regulatory authority, Tobique Gaming Commission (TGC) and granted it the right to engage in licensing gambling companies on the sovereign territory of Tobique. TGC makes the final decision on issuing a license.  

License

The Tobique gambling license is an ideal alternative to the Curacao license. It gives the same advantages and allows to operate all over the world, except in prohibited jurisdictions, but at the same time imposes fewer requirements than, for example, the Curacao license after the reform of the Curacao Ministry of Finance.

Tobique’s license covers all gaming verticals, including online casinos, sports betting, bingo, table games and other gambling. The only activity prohibited under this license is the organization of sweepstakes with physical prizes.

The license is issued for 1 year and is renewed annually. The legislation does not impose any restrictions on the number of online licenses that can be obtained for one company. The license fee covers two (2) URLs, however additional URLs may be purchased for a fee. The Tobique gaming license allows you to cooperate with the same game providers and connect the same payment solutions as the Anjouan and Curacao licenses.

Requirements for obtaining a license

1. Confirmation of the impeccable reputation of all shareholders and the director of the company (absence of criminal records)
2. Confirmation address residence of all shareholders and the director of the company. A utility bill is usually enough to prove your address.
3. Confirmation that UBO has sufficient financial resources to conduct gambling business (bank account statement for the last three months);
4. Confirmation of experience and availability of qualifications at UBO in the online gambling industry (CV, letter of recommendation, etc. are suitable for this);
5. Development and implementation of responsible gaming policies and procedures (self-exclusion, cooling-off, ability for players to set deposit limits, bet limits, game session limits, availability of links to organizations that provide support for players with gambling addiction, such as omniahealthgroup.com) ;
6. Having a functional website that meets the requirements after going through the licensing process. 

The website should have a properly designed footer. In particular, it should contain the following:

• An active seal that confirms the presence of a license,
• Section “About Us”,
• Links to responsible gaming resources,
• Information on filing complaints and resolving disputes, contacts of an ADR provider (a company that provides alternative dispute resolution services),
• Section “Contact Us”,
• Policies:

1. Terms of Use
2. Privacy Policy
3. Bonus Policy
4. Affiliates
5. AML & KYC policy

The process of obtaining a license 

The application for obtaining a license is submitted through online portal, by uploading the necessary documents. Typically, the regulator reviews an application within 2-3 weeks of pre-approval, instead of the 8-12 months typical for many other licenses. However, under certain circumstances, this process can take up to 8 weeks.

A non-refundable prepayment of EUR 2,500 is required to apply (subsequently deducted from the license fee). Making a prepayment is not a guarantee of obtaining a license.

The process of obtaining a license consists of the following stages:

Stage 1

Company registration

It is necessary to register a legal entity for gambling business. The best option is a company in Costa Rica.

Stage 2

Preparation of documentation

It is necessary to collect all the necessary documentation, which is included in the list:

• a completed application for obtaining a license to conduct a gambling business;
• business plan, charter and other corporate documents;
• the list of services and games that will be offered;
• copies of personal documents of the founders and managers of the company;
• technical characteristics and certification of the gambling platform;
• a copy of the contract with the ADR regulator-approved provider.

Stage 3

Submission of documents

Documents must be submitted to the TGC and the necessary application and licensing fees must be paid. 

Stage 4

Due diligence by UBO and the company director

UBOs with a share of 10% or more will have to undergo due diligence at the stage of obtaining a license. This involves confirmation SOW і SOF.

SOW (Source of Wealth) provides confirmation of the source of UBO’s income. 

SOF (Source of Funds) provides confirmation of the company’s source of funding. 

The following documents can be used to confirm the SOW and SOF:

• Bank statement (for the last 3 months) confirming the source of your income; 
• Tax declaration;
• Loan agreement;
• Legal / court documents on receiving inheritance;
• A document confirming the sale of property (for example, a real estate purchase and sale agreement), etc.

Stage 5

Checking the application for compliance local legislation

The regulator will review your application to ensure it complies with local law. For this purpose, the regulator may request additional documents.

Stage 6

Approval and issuance of a license

If your application is approved and your activity meets all the requirements, you will be issued a gambling license. 

Prohibited and restricted areas

Prohibited Jurisdictions

Tobique license does not allow to operate in such jurisdictions as Great Britain, USA, Ontario, New Brunswick. It is also prohibited to offer and advertise your services in countries that belong to the FATF blacklist and are under sanctions: China, Cuba, Central African Republic, Democratic Republic of Congo, Haiti, Iran, Iraq, Israel, China, Cuba, Libya, Myanmar, North Korea, Russia, Somalia, South Sudan, Syria, Great Britain, USA, Yemen, Venezuela.

Payments

This license allows you to make and accept payments both in most fiat currencies and in cryptocurrency.

Licensees are required to geo-block consumers residing in the US, UK, New Brunswick, Ontario, FATF sanctioned countries, and are required to block player registrations from restricted territories.

Corporate structure

To obtain a Tobique gaming license, you do not need to register a local company, as, for example, to obtain a Curacao license.

In principle, a Tobique license can be obtained for a company registered in any jurisdiction, but the most optimal option is a company in Costa Rica.  Costa Rica benefits from the fact that the field of online gambling is not regulated there and there is no local license for gambling on the Internet. Since payment service providers and banks cannot directly interact with Costa Rica (or any other offshore jurisdiction), it is necessary to additionally register a company in Cyprus that will act payment agent and for which bank and merchant accounts will be opened. 

Also, for tax optimization, a profitable, but optional, option is the registration of a company in the UAE, which will allow withdraw profits in fiat in the form of license fees. The company in the UAE owns property rights to certain objects of intellectual propertyassets (eg, trademark, software, etc.) and enters into a license agreement for such assets with a company in Costa Rica and receives license payments under the agreement. 

The corporate structure is schematically depicted below:

Taxation

Costa Rica

According to the Costa Rican Income Tax Law, income from transactions carried out abroad is considered income received outside Costa Rica, and is not subject to income tax. Costa Rican income tax is levied on those incomes that are derived directly from economic activities in Costa Rica.

Corporate income tax is 30%. However, the law establishes special rules for small companies whose gross income does not exceed 122,145,000 Costa Rican colones (CRC) ($240,000). In this case, the progressive rate is applied:

Cyprus

The above structure is very efficient from a tax point of view. It is recommended that the paying agent company receives a commercial fee for its role in the structure – usually a small percentage of the income received (for example, from the volume of financial transactions). For example, it can be 5%.

Corporate income tax (CIT) is paid on the income received (minus any expenses such as bookkeeping costs, rent, etc.). The current corporate tax rate in Cyprus is 12.5%.

For example, a Cyprus company has an income of EUR 1,000,000 and withholds a commission of 5%:

The cost of the license

To obtain a license, you need to make 3 payments: pre-application fee, application fee, annual license fee: