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German tax office throws out racing betting tax complaint

| By Daniel O'Boyle
Germany’s tax office (Finanzamt) has thrown out and dismissed as “unfounded” a complaint from an unnamed operator which argued that online bets on racing should be subject to the same lower tax rate as retail bets on the sport.
German gambling market

The dispute with the operator – which is based in the EU but outside of Germany and took online bets on horse racing from German customers – dates back to 2012, when the State Treaty on Gambling (GlüStV) came into effect and allowed sports betting licenses to be issued.

The operator opted not to pay taxes, pointing to a “lack of specificity and clarity” in the law and arguing the tax was constitutionally inadmissible. 

In a 2015 decision, a lower court rejected its objection to the tax as unfounded, but it was later brought before the Hessian Finance Court, which also found the objection unfounded in January 2019.

The case primarily concerned two sections of the Racing Betting and Lottery Act (RennwLottG), sections 11 and 17.

Section 11 of the RennwLottG sets a 5% tax on racing betting stakes. Section 17, meanwhile, states bets that are processed in Germany or placed by a customer residing in Germany are subject to a 5% levy on “the nominal value of the betting slips”.

The difference in tax bases would mean that taxes are higher under Section 17, as certain fees would also be included in calculations.

The operator argued that the “delimitation between the taxable elements of Section 11 of the RennwLottG and Section 17 of the RennwLottG is not clearly regulated”.

It said it was “not apparent” that its horse racing bets would fall under the latter, but rather that foreign bookmakers such as itself would fall under the former.

However, the Finanzamt ruled that Section 11 applied only to retail racing bets, while all other bets are included under Section 17. it pointed to text in the act which “clearly refers” only to bookmakers with a physical location in Germany.

“[Section 11] therefore 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,” it said.

In addition, it pointed out that section 17 refers to both sports and racing events that are not covered by section 11. The inclusion of racing would only make sense if not all racing bets were included in the section 11 tax, and that there would have been “no need” to phrase the law this way otherwise.

Germany is set to undergo major changes in its gambling landscape as the Fourth State Treaty on Gambling, the Glücksspielneuregulierungstaatsvertrag (GlüNeuRStV), set to come into effect from July 2021.

Earlier this month, the Minister-Presidents of Germany’s 16 federal states ratified the treaty, which allows online casino nationwide for the first time, but with strict limits including a maximum slot stake of €1.

Currently, online casino may be offered as part of a transition period, provided operators keep to the terms of the new treaty.

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