The Taxation of Gaming Revenue in Germany

Gaming operators in Germany have to pay Turnover Tax, Corporate Income Tax, Entertainment Tax, Trade Tax and Income Tax on their gaming revenue. German federal legislation and länder legislation is taxing gambling activities under every possible taxing statute. Turnover Tax, Corporate Income Tax, Entertainment Tax, Trade Tax and Income Tax are some of the taxes levied on gaming revenue.

There is a detailed legal framework of gambling taxation in Germany. Gambling operations like lotteries, betting and casinos are subject to Turnover Tax unless specifically exempted under the Value Added Tax (VAT) law – Umsatzsteuergesetz (UStG) – or other statuary provisions. Corporate Income Tax is also levied on corporations engaged in gaming activities under the Company Tax Law – Körperschaftsteuergesetz (KStG) – and Entertainment Tax under the Acts on Entertainment Taxes. Vergnügungssteuergesetze (VgStG) and Trade Tax under the Trade Tax Law – Gewerbesteuergesetz (GewStG) – is also levied on gaming operators.
 
 
How Is The Turnover Tax Levied On Lottery And Betting Services In Germany?
 
Gaming operators in Germany are under an obligation to pay a Turnover Tax of 16% of their turnover, unless there are specific exemptions, and/or they are exempted from the VAT liability. Lottery and betting operators are subject to a Turnover Tax only when they are exempted from the Lottery Tax under chapter II, sec.17 et seq. Horse Race and Lottery Act - Rennwett- und Lotteriegesetz (RennLottG). Raffles are exempted from the Lottery Tax under the provisions of chapter II, sec.18 RennLottG, when the global amount of lots does not exceed 650€, provided that the prize cannot be comprised totally or partly of cash, and also provided that the operator is not carrying on trade within the meaning of the trade and industry law. Authorized lotteries and raffles are also exempted from the lottery tax, provided the global amount of the lots does not exceed 40,000€.
 
 
How Are Casinos Subject To The Turnover Tax In Germany?
 
German gaming operators can only be exempted from the obligation to pay a Turnover Tax of 16% of its turnover, when there are specific exemptions and/or the operator is exempted from the VAT. Casinos are also known as kursaals. Gaming machines situated in casinos were under the general exemption from the Turnover Tax under sec. 4 Nr. 9b UStG. Machine gaming outside casinos, i.e. in arcades or restaurants, was previously subject to a Turnover Tax obligation. Presently, owing to the approval on April 28, 2006 of Gesetz zur Eindämmung missbräuchlicher Steuergestaltungen, (the Act on the Reduction of Abusive Tax Arrangements), 4 Nr. 9 lit b of the UStG was abolished and consequently both machine gaming outside casinos and other casino gaming is entirely subject to the VAT tax obligation. Therefore at present, casinos and the activity of machine gaming outside casinos are subject to Turnover Tax on revenue resulting from their gaming activities.
 
 
How Is The Corporate Income Tax Levied In Germany?
 
In Germany, corporate income is subject to Corporate Income Tax at 25% of the revenue. The state lotteries as well as the class lottery SKL are exempt from the corporate income tax liability under sec. 5 para.1 Nr. 1 of the Company Tax Law – Körperschaftsteuergesetz (KStG).
 
 
How Is The Entertainment Tax Levied On Gambling Activities In Germany?
 
In Germany, machine gaming is subject to the Entertainment Tax on the basis of lump sum taxation. The levy of the Entertainment Tax comes under the purview of länder legislation. The provisions for Entertainment Tax either stem from entertainment tax statutes (VgStG) or from local tax statutes. Entertainment Tax statutes, unlike local tax statutes, provide for fixed rates of taxation. The margin of tax rates is very large. The rates of tax in case of machine gaming in arcades is 46€ to 306€ per machine per month, and from 0€ to100€ per machine per month for gaming machines in restaurants, under different länder legislation. Bavaria forbids the Entertainment Tax.
 
 
How Are The Trade Tax And Income Tax Levied On Gambling Activities In Germany?
 
Casinos are exempted from the Trade Tax under sec 3 Nr. 1 of the Trade Tax law – Gewerbesteuergesetz (GewStG) – owing to their taxability under kursaal levy. Even though lottery activity is exercised as a trade in Germany, state lotteries are exempt from the Trade Tax under the provisions of the Trade Tax implementing ordinance – Gewerbesteuer-Durchführungsverordnung (GewStDV). The revenue generated from state lotteries is subject to income taxation under sec. 18 of the Income Tax Act – Einkommensteuergesetz (EStG) – unless they are deemed to be commercial enterprises.