Punters in Germany are entering a new era in their experience over gambling, as the amended Race Betting and Lottery Act in the ISTG which has been put in effect as of June 2023, has taken on to regulate the industry, creating therefore a safer place for betting and has also reconfigured the taxation on gambling.
But taxation does not only involve the betting shops, bookmakers, casinos and gambling service providers, it involves bettors as well, which means that if you place a bet on any legal sportsbook, such as the ones listed at allbets.tv, then you’ll be taxed for this.
Why? Simply enough, because all income – even this, which comes from gambling and sports betting and even if this doesn’t involve professional gambling – is subject to tax. Every bit of money that one can generate from gambling is taxable and provided that when betting there is no way of ensuring that you win, the state chooses to tax you from the very first transaction of placing a bet.
In short, regardless of the outcome, bettors are taxed for their wagers. This is because the state wants to tax the transaction as well. If you want to know how much tax you pay on sports betting in Germany, then this is the right place to learn.
But first things first! Sports betting and gambling are money makers for countries, especially as taxation systems become tighter, enabling governments to generate significant economic gains from the operations of the gambling industry businesses.
Essentially, as there is a growing gross industry revenue, it is only naive to think that a government will leave this industry out of its sphere of tax collection or will exclude the potential of generating an income from the industry’s operations at all levels.
GGR in Germany
In Germany, which is one of the biggest betting markets in Europe, the gambling industry’s gross revenues are said to have reached approximately €2.8billion in 2023, while GGR is expected to rise to €3.3billion by 2024.
Tax revenues, which have been rising at a 15.5% year-on-year rate, were reported to amount to nearly €597 million in the third quarter of 2023. Quite impressive right? Now, almost 20% come from online slots and nearly 15% come from sports betting – note that sports betting tax revenues have recorded a drop this year.
But how does taxation work here?
Sports betting is subject to federal taxation in Germany. Prior to the amended regulation, sports betting was taxed with a 5% rate on wagers placed, which was quite different from other gambling activities as overall there was a different taxation level for different gambling products in the country.
The amendment of the Race Betting and Lottery Act of the Interstate Treaty of Gambling 2023 (ISTG 2023) foresaw that uniform taxes are to be imposed on all gambling, including horse race betting, online poker, sports betting and virtual slot games. The tax is 5.3% on the bet after deducting the tax base, which brings us to a rate of 5.03%. Sports betting and the likes, except the online casino, have been exempted from VAT (19%) in order to ensure that there is only one-time taxation of these activities.
How are taxes collected?
Okay, now that you have learned how taxation works in Germany when it comes to sports betting, you might wonder how these taxes are actually collected.
First of all, you have to keep in mind that everytime you wager on something, there is a percentage that goes directly to taxes. This can be done in different ways. In fact, when punters place bets on sportsbooks, there are two different alternatives: either the online bookmakers charge you right upfront for the tax and include this in your betting slip or they undertake the responsibility to pay for the tax and they don’t charge you.
Those online sportsbooks that are actually charging the tax right away have two different ways of doing it. Remember, however, that the result is the same in both ways and in reality it makes no actual difference to you.
They either subtract the rate of the bet amount or they subtract the rate from the amount that punters win. So, when placing a bet of, let’s say, 10 euros @ 4.00, in the first case your bet slip writes 9.5 euros after the tax has been deducted and so in case you win, your net amount is 38 euros. In the second case, the won amount of 40 euros is taxed and you end up with 38 euros. In essence, in both cases it is the same amount that you end up with. Therefore, you should be comfortable with any of the two situations as it doesn’t really matter whether you pay it upfront or after you’ve won; it is the same thing.
There is also one other way that online sportsbooks can actually get the tax and this is by adding the rate on your wager placed. In this case, betting 10 euros would give you a bet slip with a total of 10.5 euros charged (the bet plus the tax). Here, you pay the tax regardless of whether you end up with a winning or a losing bet and it might be kind of frustrating, but it is pretty straight forward and also it ensures that you’re not to be taxed if you eventually win. This goes back to what we’ve written before about the fact that the state wants to collect taxes no matter the outcome, it wants to tax the transaction.
And then it is the case of online sportsbooks that undertake the burden to pay the taxes for you in specific circumstances or for specific bets in order to induce more betting and attract more bettors. It is really interesting, though it is the exception to the rule! You shouldn’t base your selection of online sportsbooks just on this criterion, because it doesn’t guarantee that all services and products are of quality or that they are reliable in all their facets.
Sports betting in Germany, as in most places around the world, is subject to taxation, particularly as it is an industry that generates high revenues and grows at very strong rates. As punters you need to be knowledgeable of the tax system that applies in the market you are betting in, so that you conform to the tax regulations and you have control of your bankroll.