Poker players must pay taxes on their winnings in Germany
By: Rechtsanwalt (Attorney) Carsten Lexa, LL.M.
The German finance court of Cologne has ruledthat poker is a game of skill. The ruling is in response to poker player Eduard Scharf´s claims that his poker winnings shouldn’t be taxed because poker is a game of chance, and “anyone can win a game of poker.” The court disagreed, ruling that “he had to pay income tax on his winnings saying they counted as commercial income as they were linked to his personal skills.”
According to the courd, winnings can be taxed if a poker player plays regularly and successfully in poker tournaments. THe court found that in Scharf´s case he was playing for many year in more than 20 tournaments each year. “If many people with great analytical skills come together in a game of poker, the part of luck in each game is very small”, said the court. Therefore, the winnings of Scharf had to be viewed as income from a business enterprise, and is therefore commercial income.
Only the winnings of a hobby player are taxfree, and that will be from now on the only exception from the obligation of paying taxes on poker winnings in Germany.
Which brings us to an interesting question: What happens if a player plays often but does not win – can he claim his expenses to play in the tournaments, for example flight costs or attendance fees, as tax deductible? And there is another interesting question that Mr. Scharf has to face: According to him, all in all he has lost more than he won. So – winnings are being taxed but losses do not count?
For inquiries please contact the author: kontakt@kanzlei-lexa.de
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