Colombia Implements 19% VAT on iGaming Deposits Under Emergency Powers

Colombia has introduced a 19% value-added tax (VAT) on player deposits with online gaming operators. The measure, enacted through a presidential decree, is part of a broader state of emergency declared by President Gustavo Petro. The government justified the emergency decree by citing ongoing violence in the Catatumbo region, near the Venezuelan border.

Presidential Decree Grants Authority for Tax Imposition

On February 14, President Petro issued a decree establishing the VAT on iGaming deposits. This action was made possible by an internal commotion decree signed on January 24, which allowed the president to by the Colombian legislature and enact financial regulations independently. The justification for the emergency powers was the need to address escalating violence in a border region.

The new VAT, however, is subject to judicial scrutiny. Under Colombian law, the Constitutional Court must review presidential decrees to determine their validity. If found unconstitutional, the decree will be nullified. If upheld, the VAT could remain in force until December 31, 2025, though the court may choose to limit its duration to a period of 180 days.

Impact on Rush Street Interactive and the Gaming Industry

Rush Street Interactive (RSI), a key player in Colombia’s online gaming market, is closely assessing the potential effects of the new tax on its business operations. In a regulatory filing, RSI confirmed that its Colombian operations for approximately 13.3% of its total revenue.

Jefferies Equity Research analyst David Katz described the tax as a possible challenge for gaming operators but downplayed its potential impact on RSI. In a February 18 investor note, Katz wrote, “We view the potential impact to [Rush Street Interactive] as specifically modest, while the prospects are reasonable that the decree is either short term or not instituted at all.”

Katz further noted that, even in the worst-case scenario where RSI absorbs the full cost of the tax, the financial impact would be limited to approximately 2.5% of the company’s revenue. Additionally, he suggested that the tax might benefit RSI in the long run by driving out smaller competitors and strengthening RSI’s market position. “Given its capabilities are superior to many competitors,” Katz wrote, “RSI could gain market share as a result.”

Uncertainty Surrounding the Decree’s Long-Term Viability

While the decree is in effect, RSI is exploring potential measures to mitigate its impact, including cost-cutting initiatives such as reductions in operating and marketing expenses. The company remains committed to expanding its Colombian market presence despite the uncertainty surrounding the tax’s duration and legality.

RSI executives are expected to discuss the tax’s implications further during their earnings call on February 26. Katz remains optimistic about RSI’s broader outlook, stating, “There is still a lot to like about RSI’s story, with positive iGaming trends in the [U.S.] states that have reported January revenue and positive online sports betting trends” in early 2025.

With the decree undergoing judicial review, operators and investors alike are monitoring the situation closely to determine its long-term effects on Colombia’s online gaming sector.

Source:

”Analyst: Little impact on Rush Street Interactive from sudden Colombian tax”, cdcgaming.com, February 18, 2025.