Posts Tagged ‘Germany’

Bad News for German Poker Players

Friday, November 2nd, 2012

Is poker a game of skill or chance? Personally, I believe it is a skill game where there is an element of chance. For German poker players, this is more than an interesting debate; it’s a vital question that impacts their taxes.

German tax law is such that games of chance (e.g. roulette) are not taxed for players. If you are German and hit a lucky jackpot on a slot machine, you won’t owe German income tax. However, games of skill for professionals are taxed.

As I first reported on back in August, a German court was considering this. The decision came down on Wednesday in Cologne. Eduard Scharf has been an airline pilot with Lufthansa by profession. When he’s had time off, he’s become a pretty good poker player; he has won over $1.2 million, including two World Series of Poker bracelets. Mr. Scharf apparently didn’t include his poker winnings on his tax return. The German Tax Office stated he was a professional and needed to include the income on his return.

The 12th Senate Finance Court of Cologne agreed with the tax office that skill predominates over luck. That’s what most poker players believe, but it’s bad news for German players. While it appears that Mr. Scharf is appealing to the Federal Finance Court in Munich, the days of tax-free play in Germany appear numbered. The German articles I read note that other tax cases are pending.

Summary of Story in English
Newspaper Reports in German: Spiegel Online, WDR

German Court to Decide Whether Poker Is Taxable for a Professional

Thursday, August 23rd, 2012

In 2011, Pius Heinz of Germany won the main event of the World Series of Poker and a nice tax-free $8,715,638. Well, maybe it’s not tax-free.

Via @Taxdood and @Taxnews1 comes word that a German court in Cologne will be hearing the appeal of a former professional poker player. The German tax agencies are claiming that the player was in a “commercial activity” and thus owes taxes on the approximately $1 million that this player won. The news story alludes to other German professional poker players receiving tax notices so the verdict in the test case will matter.

As Taxdood noted, “Ironically, in order to prevail the taxpayer must demonstrate success in poker relies mainly on luck, not skill.” Hopefully for German poker players the German court will not see the recent court ruling in New York that found poker to be a game dominated by skill, not luck.

Current German tax rates range are 14% (€8,005 – €52,881), 42% (€52,882 – €250,730), and 45% (€250,731 or greater). If Mr. Heinz owes tax on his winnings that would shave €2,993,502 off his winnings (he would have netted about €3,710,835, or $4,824,085). That’s not bad, but clearly $8.7 million is better.

I’ll report on the decision when it’s announced.