Germany dismisses tax appeal over online race betting

The case hinged on two sections of the Racing Betting and Lottery Act.
The case hinged on two sections of the Racing Betting and Lottery Act.

The country’s tax office has dismissed an appeal that challenged the higher tax rate payable by operators that take online bets on horse racing.

Germany.- Finanzamt, Germany’s tax office, has rejected a complaint from an online gaming operator that argued online bets on horseracing should pay the same tax rate as retail bets.

The overseas operator behind the complaint has not been named but was described as being based in the European Union.

It had chosen not to pay taxes, arguing that the tax was constitutionally inadmissible and that the law on the matter suffered from “lack of specificity and clarity”. 

Its case revolved around two sections of the Racing Betting and Lottery Act (RennwLottG). Section 11 imposes a 5 per cent tax on race betting stakes while section 17 states that bets processed in Germany or placed by a customer residing in Germany are subject to a 5 per cent levy on the nominal value of betting slips.

The different tax bases mean that taxes are higher under Section 17 as some fees are also included in the calculations.

The operator therefore argued that the “delimitation between the taxable elements” in the two sections was not clear and that it was “not apparent” that its horse racing bets fell under the latter section.

The tax office said the appeal was unfounded, ruling that section 11 of the act was applicable only to retail racing bets, while all other bets fell under section 17.

It said: “[Section 11] does not include racing bets which, due to the lack of a domestic location, are offered by bookmakers only established abroad and concluded on the internet.”

Two courts had already rejected the operator’s claim: a lower court in 2015 and the Hessian Finance Court in January 2019.

Germany has awarded its first sports betting licences under new legislation after states reached an agreement on a tradition period ahead of the launch of regulated igaming next year. 

The country’s 16 minister-presidents have ratified the new gaming legislation ahead of its implementation.

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