Germany: Federal Fiscal Court rules sales from slot machines are still subject to VAT

Munich’s Federal Fiscal Court (BFH) ruled on September 26 that sales from the operation of slot machines are still subject to value-added tax (VAT) after a change in the law for virtual slot machines that came into force on July 1, 2021.

In the case at hand, the applicant, who operates arcades, had successfully applied to the Finance Court (FG) to suspend the execution of the sales tax advance payment for August 2021, explains a press release from the Federal Fiscal Court.

“The Lower Tax Court considered it ‘seriously doubtful’ that the sales tax liability of so-called land-based slot machine game sales with a simultaneous sales tax exemption of virtual slot machine game sales was ‘compatible’ with the principle of the neutrality of sales tax,” the BFH, which disagreed with this view, says.

According to the Federal Fiscal Court, it had already been “decided several times” that sales from the operation of slot machines are subject to sales tax. Until June 30, 2021, this applied regardless of whether it was a question of sales in arcades or similar, or online sales. 

However, on July 1, 2021, the legislature changed the legal basis for this. Since then, virtual slot machines have been subject to race betting and lottery tax. They are, therefore, exempt from sales tax. On the other hand, transactions in amusement arcades remain subject to VAT.

The background to the change was, among other things, the fact that online offerings are to be classified differently than land-based offerings “with regard to the aspects that trigger gambling addiction,” notes the BFH.

“Sales in arcades and online sales are already not comparable for a number of reasons (different payout rates, different availability, potentially larger customer base online, and different gambling addiction risks),” the court noted.