How are gambling winnings taxed?
Betting is very popular and it is mainly sports betting that is a way for many players to make the game a little more exciting. If most bets are positive, this should initially be a reason to rejoice. Because with the right placement of the bet you can win a lot of money.
However, this also raises the question of whether the state wants to participate in these services. After all, it is the income that is at stake, and it is usually taxed in the form of a profit and loss account. But what about the bets and do they have to be taxed?
Here you will find information on the tax treatment of benefits.
Taxation of winnings
In Germany and Austria, the tax treatment of profits is clearly regulated. According to German tax law, only revenues corresponding to the seven basic rates are taxed. It therefore clearly defines the nature of the taxable income and the amount of tax payable. These income rates refer to Section 2 (3) EStG.
Only income that meets these definitions is actually taxed. This very quickly leads to a situation where no kind of income is applied to the profits of the taxes on the bets. This means that betting winnings in Germany are generally tax-free. If profits are made, they must be completely tax-free and can be transferred to the account and used as a whole.
The reason for this is that a tax base would have to take account not only of profits but also of losses. Not all players are lucky or have the ability to make successful bets. Most players are more willing to quit with less stakes and invest more money than themselves.
If profits were now taxed, this would also mean that losses could also be claimed. Losses would therefore reduce total taxable income and the State would lose revenue. Since, on average, players tend to lose money rather than earn it, this regulation would reduce the overall tax revenue for the State.
This rule applies not only to sports betting, but also to gambling. Here it is even clearer that the players have to reckon with an average loss. Because in contrast to sports bets there is always an advantage for the casino house. Of course, it can happen that a player leaves the casino with a win, but what is important to consider is always the average win.
It can be said that no matter how good the player's skills are, the average casino player must always expect a long-term loss. Sports betting also gives the provider a small advantage, but the ability to know to what extent players are familiar with the sport in question continues to play an important role. A high level of experience and a lot of information tend to lead players to win.
If you would like to learn more about these different betting options, you can do so on the website betting.org. Here you can also inform yourself about the betting tax.
The gambling tax in Germany
The fact that sports betting is completely tax-free is indeed only half the truth. Although winnings made during the game are not subject to income tax, the State deducts a certain portion of the stakes beforehand.
Because the state naturally wants to benefit from this growing interest in sports betting and the casino plays the same way. After all, a very large turnover is generated here, which has so far flowed completely through the tax authorities.
Therefore, a general tax on gambling was introduced in 2012. This means that players must pay a tax of 5 percent on each bet made. This is a big burden for the players as the margins are already very low. The 5 percent tax does not apply to the actual profit, but directly to the share.
This means that if a bet is made on Team X's victory and the stake is 10 Euros, then 50 cents will be withheld directly as tax on the bets.
The advantage for the players, however, is that they do not have to pay the tax themselves. The providers of these sports bets bear the bureaucratic costs and pay the betting tax themselves.
It has to be said that the providers deal with the gambling tax differently. While some providers take the direct route and show the tax on the bets directly on the betting slip, other providers pay the tax more indirectly. Some suppliers may not even specify the tax.
However, this does not mean that the bet on the bets was completely tax free. As a rule, the quotas are adjusted so that the distribution is somewhat smaller. From this difference the tax on the bets is paid and indirectly the tax on the bets is paid and billed to the player.
In this way, the player is always exposed to an additional burden from the betting tax and yet the state earns from this income.
If the bets are placed successfully and winnings are made, they no longer have to pay taxes.
Can the gambling tax be avoided?
The 5 per cent tax is a not inconsiderable burden. Players may be tempted to avoid this tax. Since the tax is only paid in Germany, it would be logical to bet cheaper during the holidays or to quickly cross the border into Austria or Switzerland.
The application can be played from this location and the betting fee can be saved. As betting operators operate internationally, this should not be a problem.
However, the state has clearly ended these tricks by making the resident responsible for whether the betting tax is payable or not. This means that anyone residing in Germany must pay betting tax regardless of their current place of residence.
Not even a short border crossing to one of the neighbouring countries or a holiday abroad means that the gambling fee can be avoided. As long as the domicile remains in Germany, the betting tax is automatically levied by the betting provider.
However, the legal situation for internationally active providers is not clear, but without a betting licence in Germany. On these pages players from Germany are tolerated and not allowed. There is no gambling tax here, but the legal situation is not clear. Players can be processed or must pay subsequent taxes on bets. Therefore, it is clear that playing with these providers is not recommended.
Taxation of professional players
It is also complicated when a large part of the revenue is generated by sports betting. Classification as a professional player may result in the income being considered ordinary income and having to be disclosed in the tax return. This may be the case if more than half of the revenue is generated by gambling. However, as there is no fixed limit here, the decision on the classification as a professional player must be made on a case-by-case basis.
In this case, it may make sense to consult a tax advisor in advance, as the tax office may, in the worst case, demand an additional tax payment. Since the determination of the professional players depends on the respective decision of the tax office and is not always comprehensible, players who regularly receive a large part of the income from bets should seek professional help.
As a result, amateur players already pay betting taxes in the form of betting taxes and no longer have to declare winnings in their tax returns, but professional players must be much more cautious and possibly pay taxes on winnings. As so often the legal situation in the betting sector is not always 100% understandable and depends on the individual case. Therefore, in case of doubt, you should consult your tax advisor or the tax office.
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