Does the state collect my winnings? – Taxes on gambling winnings
Can anyone who has won the jackpot in the online casino actually enjoy their winnings indefinitely? Or maybe the tax office wants to get its share of the profit in the form of taxes? There are several answers to these questions that we want to give you here. “Won” – and now? If you clear away in the online casino, after your first joy, you may ask yourself whether you can now just keep the whole winnings. Or maybe you even have to pay taxes on profits to the state? The answer is a clear “yes and no”. In most cases, lucky guys can simply be happy and enjoy their winnings. However, there are not a few exceptions and cases where taxes are then due. We want to resolve here this muddle-Warr and give answers. Taxes on gambling winnings What laws apply to gambling winnings? There are a variety of taxes and fees that ultimately all go to the state. In the case of sweepstakes, three types are important, namely income tax, sales tax and lottery tax. You will also stumble across the term “profit tax”, which, however, in tax law jargon does not mean what you would expect as a layperson – this term has nothing to do with the taxation of gambling winnings (see below). Income taxes are those that, for example, every employee is automatically deducted from their wages on a monthly basis. Self-employed persons, companies, farmers or landlords also pay income taxes. In stages, you always pay a share of what you take. There are seven types of income that are taxed in German income tax law – specifically in the Income Tax Act (EstG).
This is income from: Agriculture and Forestry Commercial operation independent work employment capital assets Rental and leasing as well Other income (pensions and other recurring income) And since there are only these seven categories, it follows that “winnings from gambling are not subject to income tax” . This is because profits that come from such sources, which are mainly based on luck or chance, are simply not covered by the Income Tax Act. They do not fall under any of the seven given definitions. Especially not because they are not recurring or regular with “normal casual gamers”. But that also means that there is no paragraph in the EstG that clearly states that gambling winnings are exempt from tax. There is just no one who defines them. And that in turn creates a lot of room for interpretation for (financial) dishes, which can be enough for professional players for the night part. Sales taxes are another field. In general, they are known as “VAT”. This is usually due when there is a “service exchange” between two parties – a sale or a service. Gambling winnings are actually exempt from VAT. This is regulated in §4 Paragraph 9 b , which states that the “Turnovers that fall under the Racing Betting and Lottery Act ” (turnovers) are tax-free. So VAT is definitely not payable on gambling winnings. However, this does not mean – as is often stated in guides – the general tax exemption (see income tax and below). Lottery tax also applies . Winners only have an indirect connection with that. In Germany, taxes are levied on the operation of racing and sports betting as well as lotteries. However, the operator has to pay for his income. However, all these regulations only apply to German lotteries and sports betting or online gambling providers licensed in Germany or the EU. Foreign lotteries fall under the respective state laws – and not EU casinos are actually not legal. In the latter case, profits may either not be paid at all or may even be confiscated. Taxes Income Tax Act The EStG knows these types of income. Winnings from games of chance are generally not included. What is a gambling win in the legal sense? Games of chance are defined by the fact that their course is largely determined by chance – or luck. This is important because profits that are based solely on chance do not fall under income tax legislation – so they are tax-free. This applies in particular to lottery winnings or one-time large jackpot winnings. Gambling – according to the Federal Fiscal Court in 1999 – is organized outside the economic cycle in the social sphere, depends on chance, serves pastime, distraction and thrill of the players and “does not regularly require any significant mental activity”. It is different if the profit is “based on certain skills” or is a regular source of income. This is how the courts define that, for example, profits from futures transactions on the stock exchange – as much as they can give the appearance of a game of chance – are not based purely on chance, but rather on an intellectual ability.
They are therefore taxable because they are income based on acquisition. With the same reasoning, poker players who have won high have already been used to pay taxes. The Finanzgericht Köln did not consider the outcome of poker to be based on chance alone, but as “based primarily on skill, analytical thinking and psychological skills”. According to several financial courts, those who play professionally, so to speak, professionally represent a regular source of income for them – then income AND sales tax may even be due on poker prize money or profits from online casinos. When can I keep all of my winnings from gambling? As mentioned above, there is no general exemption for winnings from gambling in Germany. However, the vast majority of profits are actually tax free. This applies in any case if the following conditions are met. It is a win from a game of chance, i.e. from a lottery, a sports or racing bet, or a win from a game in a casino or an online casino, the course of which depends only on chance. (Poker is a matter of interpretation) Prizes from competitions, raffles, raffles or bingo are also included, even if the prizes are in kind. The winning player is an amateur or casual player. So there are no regular, professional income from the game that is used only for a living. There are no regular tournament participations or (regular) special obligations in the context of such events as moderation or advertising appearances.
The lottery, the betting provider, the casino or the online casino are licensed in Germany or, in the case of online casinos, are at least equipped with an EU license. So if you have surprisingly won a lottery or hit the mega jackpot in a licensed online casino, you can simply be happy and spend your winnings with your hands full. A tax breakpoint can only come if you put the money on the high edge – more on this below. What does “profit tax” mean? It might be confusing to those who come across the term “profit tax” when doing research online. Profits are tax free? Yes, GAMBLING winnings (see above – with all exceptions and pitfalls). Profits in the tax sense are every income. For this reason, the term “profit tax” is generally used as a generic term for income, corporate and trade taxes, that is to say for all taxes on economic income that can be understood as the profit of a business. The “profit tax” has absolutely nothing to do with winnings from games of chance. When do I have to pay taxes on gambling winnings? As we have seen (see above), contrary to what is often claimed, there is no general tax exemption for gambling winnings. Since gambling winnings in a way just fall through the tax grid, there are enough cases in which taxes are due – but usually not for the “normal” players. As it is a matter of legal interpretation of the courts, taxes may (but do not have to) be payable if the following conditions are met. The game from which the win comes is not a pure game of chance. Skill and skill as well as other skills are necessary for the game. According to some financial courts, this applies, for example, to poker. It is not just a matter of chance deciding on the outcome. This can also apply to intraday stock market speculations, which are of a gambling nature, but also (actually) require skills. Border areas are also sporting events or e-sports tournaments. In the case of a “lucky throw” onto the basketball hoop, for example, it would be possible for the (finance) judges to look at whether the thrower is a professional athlete or an amateur. Also profits in television showsquizzes like “Who Wants to be a Millionaire” or “Beat the Star” and the like are usually taxed. The judges argue that certain skills are a prerequisite for gain, i.e. knowledge or physical properties. The player is a professional player. Those who play for a living and make a living from regular large or small winnings are subject to tax legislation.
There may even be sales taxes due – courts sometimes view such players as “ entrepreneurs ”. Even those who regularly take part in tournaments – off or online -, travel to various events and perhaps also act as moderators in poker tournaments, for example, will have to pay tax on their winnings. An example is the professional poker player Eddy Scharf , whom the Finanzgericht Köln classified accordingly. If the prize was won in a non-German or even non-EU lottery or in an online casino that is not licensed in Germany (i.e. in Schleswig-Holstein) or the EU, then taxes may be due. Under certain circumstances, several times. First of all, the tax law of the respective country applies. So it may be that taxes are due in the country where the lottery or casino is located. This also applies to local winnings, for example in a casino abroad. Under certain circumstances, taxes and fees may become due again when the money is transferred to your account – or if you bring it with you from abroad in cash. At online casinos without an EU license, the money won may even be confiscated, Because the current legal situation in connection with the State Treaty on Gaming allows online casinos with a Schleswig-Holstein license in Germany (actually only in the federal state) and online casinos with an EU license also have at least a certain “tolerance status”. Strictly speaking, other online casinos are illegal in Germany, which means that profits from them would be too. The later consequences of a big win are somewhat more indirect.
Because even if the – one-off – profit is tax-free, taxes have to be paid later if you have any income from investing the money. You will find this described in more detail in the following section. What if I invest my earnings with interest? As we’ve seen, winnings from lotteries, sports betting, and other gambling are usually tax-free – unless you’re a professional player. If you hit all the money won on the head and only spend it for pleasure, it will be gone afterwards, but you definitely don’t have to pay any taxes. It is different if you invest the money “more sensibly” and, for example, invest it in real estate or in shares or simply put it on a savings book. Because then the same rules for income taxes apply as usual. You generate income with interest or rental and lease income – and that is subject to income tax.
This means that the profit itself remains tax-free, but indirectly you pay tax when you buy a house from the profit and rent it. But then on the rent and not on the profit. The so-called withholding and withholding taxes apply to interest on savings books and the like, depending on the amount (exemptions and exemption orders naturally apply as normal). And whoever invests in shares must of course also pay taxes on the resulting “investment income”. If you have won a large sum and are giving away a large part of it to people of your choice – you should also seek the help of a tax expert such as a tax advisor. Because then, depending on the amount, gift tax may also be due. Where can I win legally? To emphasize that again: Lotteries, competitions, sports betting, casinos, casinos and online casinos with a German license are completely unproblematic. They are licensed and usually also guarantee that you actually get the profit.
There you can win legally and – if you are not a professional player – also tax-free. Online casinos with an EU license are actually just as safe, even if they legally hover in a gray area. Since EU law also applies in Germany, you can also legally, securely and tax-free profits there (as a hobby player). With lotteries, lottery providers, sports betting providers, on-site casinos and especially online casinos that are not licensed in the EU, it can not only be tax complicated. It may also be that you do not get the profit at all or even that you make yourself punishable and any profits are confiscated. You can find an overview of all the advantages of online casinos with an EU license and a selection of the top casinos with an EU license here . Conclusion Generally speaking, winnings from legal gambling, the provider of which is licensed in the EU, are not subject to income tax in Germany if the winner is not a professional player.
Sales tax is also not due. Professional players and winners at poker, TV shows, stock market speculations or other things that require a certain skill must expect to be taxed on income. Professional players may also pay VAT. Those who win from non-EU providers can face problems beyond tax.