German Federal Fiscal Court rules online poker winnings subject to Income Tax

The German Federal Fiscal Court (BFH) has issued a ruling stating that winnings from online poker games can be subject to income tax as income from commercial operations. The decision, XR 8/21, was announced earlier this year. The case involved a math student who began playing online poker in the "Texas Hold'em/Fixed Limit" variant in 2007.

Over time, he gradually increased his stakes and saw significant profit growth. In 2009, the year of the dispute, he earned over €80,000 ($87,550) from online poker, with his winnings continuing to rise in subsequent years. During the period from July to December 2009 alone, he recorded a total playing time of 673 hours.

The finance court, as the factual instance, determined that the plaintiff engaged in commercial activity starting in October 2009. As a result, the profit of approximately €60,000 ($65,000) made during the months of October to December 2009 was deemed taxable income.

The BFH has upheld this assessment, aligning with previous decisions regarding poker played in face-to-face tournaments and casinos. The court acknowledges that poker involves elements of skill and is not solely a game of chance for income tax purposes. This principle also applies to online poker, even though direct personal contact with other players is not possible in that setting.

However, it is important to note that not every poker player is subject to income tax according to BFH case law, regardless of the form of the poker game. Recreational and hobby players engaging in poker as a private activity do not face tax implications for their profits or losses.

The threshold for taxation is surpassed when a player exceeds the scope of a private hobby and focuses on generating income. Factors considered include the player's planned actions, market exploitation, and the extent of their monetary and time investments, among others.