Those who play in the casino, for example in Europe’s largest casino in Campione d’Italia, usually do so as part of their leisure activities. Profits and other income therefore do not constitute income within the meaning of the German tax laws. At the same time, however, the expenses, i.e. the use of games, are also part of the costs of private living. They therefore have no tax impact either.

But what actually applies when players in the casino or gambling exceed the limit of professionalism? Can poker and co. constitute a “sustainable entrepreneurial activity” according to § 15 EStG? The Bundesfinanzhof had to deal with this question in more detail in February 2023.

First principle: Casino and gambling are exempt from taxation

Players with their leisure activities are generally not covered by the regulations of income tax law. The reason for this is comparatively obvious, since the limit to professionalism is rarely exceeded. If the corresponding hurdles were lower, de facto every revenue would have to be subject to taxation – for example, profits that result from your own wedding or remain as a “surplus” after a birthday party.

Therefore (online) casinos, lotteries and other recreational games do not fall within the scope of the Income Tax Act (EStG). Expenditure related to these activities shall be included in the private lifestyle. According to § 12 no. 1 EStG, there is a general deduction ban for them, as we also know from private cars or our own single-family house. In other words, the tax office is generally not interested in what taxpayers do in their leisure time and with their taxed gross income.

However, it looks different if the activities in the casino fall under one of the seven types of income of § 2 EStG. After all, if all the prerequisites for taxation are present here, the supposed leisure activity is no longer such. With its decision of 22.02.2023, X R 8/21, the Bundesfinanzhof (BFH) applied these principles to a professional online poker player.

2nd starting case: poker player achieves high profits in the casino

The initial case decided by the BFH was comparatively inconspicuous. A 20-year-old student spent his free time mostly in various online casinos. Over the years, he continued to expand his poker skills and made profits of EUR 105,000 to EUR 735,000 between 2009 and 2013. In total, he earned several million euros with his activities in the online casino.

He himself considered that his games were a commercial activity within the meaning of § 15 (2) EStG. Therefore, he declared the corresponding profits in the income tax returns of the dispute years. He proceeded here according to the principles of the revenue-surplus account, so deducted all expenses from the sum of the revenues. In order to go to “number safe”, he finally increased the calculated profit by a safety surcharge of around 20 %.

After the tax office had issued all tax notices, the later plaintiff filed an appeal. As a justification, he stated that his activities in the casino represented gambling and were thus without tax relevance. However, it has not had any significant success in opposition or first-instance proceedings.

3. BFH’s decision: Winnings from online poker can be taxable

The Bundesfinanzhof followed in this case the assessments of the lower court. He saw in the activity of the student a full professional, commercial activity. In the first step, he justified this with the time requirement, which clearly went beyond a “classic hobby”. In some years, the plaintiff spent around 180 hours monthly in the casino and was even active on several platforms at the same time. Over five years, he played more than 780,000 individual games.

Subsequently, the BFH examined the prerequisites for a commercial activity one after the other. Since all other types of income were excluded, it was limited from the outset to § 15 (1) sentence 1 number 1 and paragraph 2 EStG. The following principles also apply to other (lucky) games. Specifically, the poker games in the casino fulfilled all the requirements for a commercial and thus taxable activity: