Taxation of a professional player
November 20, 2012 | 100,00 EUR | answered by Michael Herrmann
Which criteria determine whether one falls into the category of a professional gambler (in the sense of gambling as a main source of income)? To what extent is such a professional gambler taxed even though gambling winnings are generally tax-free?
Can such a professional gambler also declare losses to reduce taxation?
What would a tax return of such a professional gambler look like?
-> In what form would the exact "income" need to be proven? (more or less impossible)
Does the recently implemented 5% direct taxation on all betting winnings at bookmakers with a German license negate all previous questions in that taxation is already taking place and double taxation is not possible?
Dear questioner,
First of all, thank you for your inquiry, which I would like to answer based on the information provided by you and in the context of your initial consultation. The response is based on the facts presented. Missing or incorrect information regarding the actual circumstances can affect the legal outcome.
The category "professional gambler" is not relevant for tax purposes. If there is taxable income, it will be taxed. It is irrelevant whether the income is minimal, earned on the side or by chance, whether a main profession is pursued, or any other scenario. Taxable income is added to the rest of the income and taxed accordingly.
However, gambling winnings are generally not taxed if it is considered a game of chance. A game of chance occurs when the player's skill does not play a role in winning the game and the prize money or winnings do not represent consideration for a service provided by the player.
This applies to the following types of games according to case law:
Winnings from lotteries, sports betting, roulette, slot machines,
Winnings from contests,
Winnings from casinos,
Horse race betting.
It is irrelevant whether the player attributes the winnings to their own skill. The game structure is decisive. Ultimately, gambling winnings do not fall under any of the income categories of income tax law.
An exception applies to professionally conducted poker games. According to case law, frequent participation in reputable national or international poker tournaments, regular recurring winnings, and a high level of recognition through successful games are indicative of professional poker playing. The professional gambler operates with the intention of making a profit and participates in general economic activities, as the extent of their gaming activities, skill level, and revenue and stakes are not just for leisure but are actively pursued for income generation.
The 5% taxation of sports betting under the Race Betting and Lottery Act that you mentioned is an indirect tax in the form of a consumption tax. Therefore, it is not a double taxation of income.
This situation is comparable to the income and business tax applicable to profits from the sale of sparkling wine, where sparkling wine tax and sales tax are also levied simultaneously.
I hope these explanations have provided you with a sufficient overview of the situation within the scope of your initial consultation and I remain
Yours sincerely,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax consultant
