The new regulations allow the state to reap revenue from online gambling.

TALLINN — Online gambling has been a free-for-all in Estonia for many years, but will now be regulated since the state has applied a law that requires Internet casinos to be hosted in Estonian servers.

Previously, online gambling sites were not allowed to be hosted on Estonian servers, but were not barred from from being used by Estonian gaming enthusiasts. The Gambling Act, which came into force on Jan. 1. reverses this; now, online gambling sites must be hosted on an Estonian server and those not will be blocked.

To set up an online casino in Estonia, the company must receive an activity permit and pay a 5 percent sales tax that excludes player winnings.

“As such, online gambling taxation in Europe is nothing new, it has been applied in most of the countries,” Annika Vilu, press spokeswoman of the Ministry of Finance told Baltic Reports. “Estonia’s tax rate is still one of the lowest in Europe, something which new bingo sites of 2019 online are taking advantage of.”

Tõnis Rüütel, executive director of Estonian Association of Gambling Operators said that he had a long discussion with Jürgen Ligi, the Minister of Finance on what would be the tax rate for internet casinos.

“There are countries with smaller tax rate, such as Malta and Gibraltar with 3 percent but we don’t want to have a reputation of a tax paradise,” Rüütel told Baltic Reports. “Also the situation so far has been absurd as the gambling addiction emerged in Estonia, but all of the income went elsewhere.”

If an online casino in Estonia does not meet the requirements its website will be blocked and its bank accounts frozen.

“We’ll see how the law comes into force, and if it will be possible to block the gambling sites not fit for the requirements, but some other countries have not been able to do it so far including the U.S.,” Rüütel said.