The Canadian tax court currently has to deal with the question of when professional gambling becomes a profession. The current case involves three poker professionals who were asked by the responsible tax authorities to pay the equivalent of around 2.6 million euros in taxes.
Those who gamble professionally and earn a living from it also have to pay taxes for it. That is the principle that still applies in many countries. The problem: at what point does the hobby become a profession? How high must the same day income be and for how long must it be maintained in order for it to become taxable? The Canadian tax court now has to deal with these questions.
Poker pros win several million CAD
Between 2008 and 2012, the three poker pros Philippe D’Aureuil, Antoine Bérubé and Martin Fournier-Giguère took part in various poker tournaments – with great success. Throughout the period, the pros posted revenues of $ 5.1 million, $ 3.2 million, and $ 1.7 million, respectively.
The tax authorities in Canada have of course noticed that the poker pros have been so successful. A little later the poker players were asked to pay. An amount equal to 25% of the profit was requested. This is Canadian income tax. The tax authorities argued that these are obviously poker professionals whose job it is to play poker professionally. In addition, some of them even dropped out of their studies in order to be able to concentrate fully on playing poker.
Federal tax agency now calls for $ 3.75 million
In total, the Canada Revenue Agency (CRA) is demanding an amount of 3.75 million CAD from the three poker professionals. In addition to the tax liability, the poker players are supposed to pay a fine of 1.25 million CAD.
In Canada – similar to many other countries – the principle applies that profits from gambling activities are tax-free. But only if playing is a hobby. Anyone who plays professionally and earns a living from it, of course, has to pay taxes as with any other job.
Poker players see themselves in the right
The first hearing in this case took place in September. The poker players concerned got involved and stated on the record that they only see themselves as hobby players. Although they have made considerable winnings and also played regularly, they would have lost a not inconsiderable share in the further course of the game. The Canadian tax authorities did not take into account the losses at all.
The Canadian tax court now has to answer, among other things, the question of whether poker is a fully fledged game of chance or whether it is more of a strategy game. In addition, it is important to clarify whether regular participation in the game is equivalent to professional activity. As early as June we reported on an interesting ruling by the Münster Finance Court. The court came to the conclusion that online poker winnings can be taxable.
It remains to be seen how the Canadian tax court will ultimately decide. The fact is, however, that it will remain difficult to distinguish hobby gamers from professional gamers in the future. The transition is usually fluid. But the consequences, as can be seen from this case, are considerable. After all, the Canadian tax authorities are still demanding an amount of 3.75 million CAD from the three poker pros, which is the equivalent of around 2.6 million euros. The main conclusion is only one – Play in the best online casinos, not poker!