Do poker profits have to be taxed? It depends, says the law in Germany
On October 31st 2012, something important changed for poker players in Germany: the Financial Court of Cologne judged that poker winnings are taxable. An unpleasant judgement for all poker players – because until then, poker games were treated as gambling activities like the lottery, so the winnings were tax-free.
But who is affected by the new law? Calm down, if you’re just playing for fun and only win if the luck is on your side. You only have to pay taxes, if you’re make a living with the profit of your poker winnings – and if your profits are influenced not only by luck, but also by skill, strategy and psychological procedure.
Tax office looking for clues
The German tax office took a closer look at poker players and became aware of a man who spoke in an online video interview about his high poker winnings. For years, he took unpaid leave, gambled six hours a day, and generated an income of 1,600 euros.
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In summer 2017, the Federal Fiscal Court (BFH), Germany’s highest court for taxes, confirmed: playing poker has to be taxed if it’s an commercial activity.
When is playing poker regarded as "commercial"?
Poker is considered as a commercial activity if three points are fulfilled:
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Self-employed and permanent activity
When does a hobby player become a professional player? That’s difficult to generalize. The important factor is not a specific number of hours per week, but it depends on the individual case. However, poker players who regularly take part in tournaments (sometimes in Europe or even worldwide) and those who spend a lot of their time playing poker games can generally be considered as permanent players. -
The intention to make permanent profit
The Federal Fiscal Court describes the intention to make permanent profit as follows: if the intention of earning money is bigger than the gambling passion, a commercial activity can exist. But everyone who plays poker wants to win for sure, which is why this point is difficult to check. - Participation in economic traffic
According to the Federal Fiscal Court, players who professionally participate in tournaments offer their playful abilities as a "service", which – in the case of success – is rewarded by the prize money. The entry fee (buy-in) is considered as an operating expense, which can be deducted as business expenses.
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Professional players should basically document all expenses (travel costs, entry fees, coaching, etc.) so that they later can be deducted from the poker profits during the tax return.
In such cases, losses should also be tax-deductible if this newer law is consistently applied. In general, professional poker players have to pay tax on both – their offline and online profits.
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The most important poker tournament is called World Series of Poker. Read now what the best poker player wins on the event in Las Vegas. Furthermore we explain which role rounders play in a poker session.