Taxation of Poker in Germany – Important Aspects

Poker Club PS

With the introduction of new gambling regulations in Germany, things got pretty straightforward for lovers of online slots and casino games. However, the line got a bit blurry when it came to all the variations of online poker games.

While professional poker players are taxed in regard to the income tax law in Germany, amateur players don’t have to pay such high taxes. However, as suggested by the CasinoAllianz chief editor Katharina Hahn, these guidelines may be misleading.

The poker tax in Germany, on the one hand, provides the state with additional revenue and regulates gambling, which can be a positive aspect for society. On the other hand, the complexity of tax rules and the ambiguity of their application can create inconvenience for players, making it difficult to understand the requirements and declare winnings. Additionally, the level of taxation may vary depending on the player’s income and status, causing confusion and potential controversy. It is important for players to comply with the law and consult with professional tax advisors to avoid tax issues.

Rulings of the Financial Court of Cologne

The hard truth hit poker players on October 31, 2012, when the Financial Court of Cologne ruled in favor of the officials in a well-known case. There was an audit conducted in this case on whether or not poker should be considered a game of chance like a lottery.

Sadly enough for players, the judge ruled that poker is instead a game of skill. So players don’t rely purely on luck, because of that, frequent players with a record of participating in poker content regularly were subject to paying income tax.

Moreover, the court of Munster went one step further to claim that poker winnings were even subject to the sales tax. At least it was fortunate for players that this was ruled out, and the result of all the legislation on this topic is that now poker players in Germany have to pay income tax.

The Federal Financial Court (BFH) ruled in favor of players in terms of the sales tax legislation. As they further stated, it would only have to be paid in case players were paid to participate in a tournament.

Another decision of the Federal Financial Court (BFH) regarding poker

An interesting case occurred on August 30th, 2017, when the court calling was called for the case between a student poker player and the tax office. The player managed to secure more than 60,000 euros of profit in a single year by playing online poker for around 26 hours a week.

He meticulously reported all the winnings and was believed to be exempt from the filings as this was considered to be online gambling. However, the court stated that he may even have to pay the sales tax besides the income tax on his winnings.

This was described as an aftermath of legislation on him being an entrepreneur because this was a commercial activity and not just online gambling. While this case got quite some publicity, the player had to pay a sales tax that was later overturned for most cases of online poker playing unless the player had been paid by tournament officials to enter the contest.

Additional factors

The main problem with these regulations is that it gets difficult to separate professional players from players who play for a hobby. That’s why the regulations get blurry, and here are some of the main points that came in the aftermath of these legislations:

  • It’s difficult to say if poker is an individual or commercial activity.
  • Poker gaming, where players are paid to join the tournament, may be considered commercial activities.
  • Players who frequently participate in tournaments could be considered to play for profit.

Poker as a permanent independent type of activity

It’s crucial to note that the German government and tax office now find poker to be a permanent and self-employed activity. However, this only goes in case players spend enough time playing online poker to make it qualify as permanent employment.

Participation in poker tournaments

On the other hand, taking part in a poker tournament still doesn’t qualify as a permanent activity if it occurs once in a certain time period. However, if you take part in contests where you get paid to play by the organizer, you’ll be eligible to pay taxes.

Gaming to obtain constant profit

Finally, the German tax office will find you eligible for tax payments in case you constantly play poker, and your winnings show that it’s your way of making a constant profit. So, if your reports show frequent winnings, your poker playing will be classified as employment.

Ultimately, it all comes down to classifying poker as a profession and commercial activity when it comes to paying taxes on your winnings. The BFH and tax office agreed to allow amateur players who only play occasionally not to be eligible for a tax payment. With this in mind, all the players who take part in poker tournaments regularly or play online for a significant amount of hours weekly will have to pay income taxes.

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