Gaming in Germany Newsletter: German Bundestag to adopt 5.3% turnover tax on online gambling services

By | June 17, 2021

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Last week, the Finance Committee of the Bundestag, Germany’s federal parliament, approved an amendment to the country’s Horse Racing and Lotteries Act, which introduces a uniform tax rate of 5.3% on gaming stakes for various online gaming verticals in Germany. The necessary plenary vote, which will take place later this month, is expected to be a formality. The new tax rate will apply from July 1, 2021.

In practice, the tax rate will be slightly lower, as the included tax is factored out of the tax base. Specifically, the effective tax rate will only be 5.03%, according to the following formula: (gross value * tax rate) / (gross value + tax). For instance: (€100 * 5.3) / €100 + €5.30) = 530/105.30 = 5.03%.

Despite the adoption of the gambling tax amendment by the Bundestag, the legality of the new tax rules remains uncertain. Earlier, trade bodies DSWV and EGBA submitted a detailed state aid complaint to the European Commission regarding the proposed tax regime for online gambling services (background here).

Although the complaint has reportedly been taken seriously by the Commission, the resulting (ongoing) procedure will have no influence on the entry into force of the tax amendment on July 1.

For now, this means that all (future-)licensed, Germany-facing operators will very soon have to contend with an effective tax rate that is far higher than the 15-30% tax on GGR (rather than turnover) that is being charged in many other European jurisdictions.

As a result, the competitiveness of the regulated German online gambling industry, especially compared to its offshore peers, will be severely impacted. The fact the Germany’s new national gambling market supervisory authority will not be fully operational for at least several years, is also not helpful in this regard.

Considering the expected absence of effective enforcement measures, it is hard to see how Germany-licensed operators, in particular providers of virtual slots, can be profitable under these circumstances.

Germany’s Financial Supervisory Authority refuses responsibility for gambling-related payment blocking

Germany’s Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) has said that it is unable to take responsibility for payment blocking in relation to unlicensed online gambling activities.

According to the BaFin, it is the responsibility of the federal states to prohibit banks from facilitating illegal gambling. Being a federal agency, the BaFin claims it lacks the appropriate authority to get involved.

“As a federal supervisory authority, we respect the constitutional order of competencies and the will of the legislature to transfer responsibility for monitoring gambling providers to the gambling supervisory authorities in the federal states,” a spokesperson said. According to the spokesperson, who declined to give specifics, the BaFin would nonetheless work to ensure that the banks under its supervision would not facilitate illegal gambling. „We take this task very seriously.“

IBIA publishes study on optimum approach to betting regulation

The International Betting Integrity Association (IBIA) and its partners have published a joint study assessing the regulation of betting in 20 jurisdictions across six continents and covering a range of licensing models.

The study has been conducted by leading global gambling data and intelligence company H2 Gambling Capital.

The resulting report includes a jurisdictional ranking with Germany finding itself in the middle of the pack, significantly behind countries such as the UK, Sweden, and Denmark: “Long-awaited regulation of one of the largest markets in Europe immediately attracting licensees. However, the turnover-based tax and in-play betting product restrictions may cause consumer channeling issues hindering regulatory oversight and fiscal returns,” IBIA concludes.

The report further contains an optimum betting market solution in the form of ten regulatory pillars, which include betting taxes in the 15-20% of GGR range and no significant restrictions on which bets are allowed.

Upcoming Events

The following events may be of interest to the Gaming in Germany community.

  • The third edition of CasinoBeats Summit will return to Malta from 13 – 15 July, 2021, as part of Summer iGaming Week organized in partnership with KPMG and Gaming Malta.

  • iGB Live and iGB Affiliate have also been moved to 28 September – 1 October, 2021, but will still take place in Amsterdam!

  • The 2021 Gaming in Holland Conference has been scheduled for 1 October, 2021 – the very day that the regulated Dutch online market finally opens. Netherlands Gambling Authority chairman René Jansen has agreed to deliver the keynote speech. Save the date!

  • SiGMA Europe has been rescheduled to 16 – 18 November, 2021.

  • The Betting on Sports America conference and expo has been scheduled for 30 November – 2 December, 2021 and will bring together all the major players in the fast-growing North American sports betting industry.

  • The World Gaming Executive Summit is returning live on 6 – 8 December, 2021 at the W Hotel, Barcelona.

  • ICE London and iGB Affiliate London have been postponed to 1 – 3 February, 2022.

Other news

A new study suggests that new restrictions and taxes in online gambling in Germany could lead to 40% of players playing offshore and may cancel out player protection efforts.

Newswire has published a free report on the German gambling market.

YouTube has decided to ban some ad verticals, including gambling, from buying masthead ads.

The European Gaming and Betting Association (EGBA) has expressed concerns over Italy’s new proposals for online gambling licensing which seek to reduce the number of online gambling licensees in the country by two thirds.

The head of the Swiss gambling regulator, Jean-Marie Jordan, has resigned his position.

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