In 2014, the UK introduced a new tax regime for gaming duties under which all (foreign and domestic) providers of online gambling services are required to apply for a license and to pay a duty for all business placed with operators from UK customers. Under the previous regime, only service providers established in the UK were subject to gambling duties.

The Gibraltar Betting and Gaming Association (GBGA) is a trade association for gambling providers. Most of its members are Gibraltar based providers of remote gaming services and many have significant UK facing business. This new tax regime, if implemented as the UK intends, could cause certain Gibraltar based operators to consider their domicile, at least for parts of their operations.

The GBGA challenged the new gambling duty regime before the UK courts, stating that it was contrary to the freedom to provide services as enshrined in article 56 of the Treaty on the Functioning of the EU (TFEU)

On 19 January 2017, Advocate General Szpunar of the Court of Justice of the European Union (ECJ) gave his Opinion in the case of Gibraltar Betting and Gaming Association Limited v. Commissioners for Her Majesty's Revenue and Customs, Her Majesty's Treasury.

This is not a final ruling, just an opinion, but one that many suspect carries significant weight. The conclusions are not good for the GBGA.

A high level summary is as follows:

The AG began by noting that although it is clear that EU law applies to Gibraltar (article 355(3) of the TFEU), it is silent as to how the fundamental freedoms apply between the UK and Gibraltar.

After an overview of ECJ case law the AG considered that the TFEU uses the term "...nationals of Member States...". Article 355(3) of the TFEU does not grant Gibraltar itself the status of Member State. As such, the AG proposes, that the UK and Gibraltar can be nothing other than a single Member State for purposes of article 56 of the TFEU.

The AG proposes that whether or not the gambling duty represents a restriction on the freedom to provide services is hypothetical since they are a single Member State (and the freedom to provide services does not apply to purely internal situations). However, if the ECJ were to find that the UK and Gibraltar are not a single Member State, the AG suggested that the regime charges tax in the same way for all providers of the defined gambling services, irrespective of where these providers are established.

The AG also rejected the GBGA's argument that the tax charged constitutes an extraterritorial tax (i.e. a tax on the profits of suppliers located outside the UK) and not a tax on consumption or consumers.

As to whether the tax constitutes a restriction on the (hypothetical) freedom to provide services, the AG proposes that it does not. In the first place, the tax is applied in exactly the same manner to both local and foreign providers of the gambling services. The argument that a tax may give rise to double taxation also fails: the ECJ has held consistently that double taxation is not prohibited by the fundamental freedoms.

The AG proposed that the ECJ answer the referred questions by deciding that: "The United Kingdom of Great Britain and Northern Ireland and Gibraltar are to be considered as a single Member State for the purposes of the application of Article 56 TFEU."