Global Daily Tax News, German Gambling Tax Regime Deemed Unlawful, (Jun 21, 2024)

The European Commission has concluded that Germany's special tax schemes for public casinos operators are not in line with EU state aid rules.

Germany must now recover the incompatible state aid, including interest, and abolish the tax schemes for the future.

The conclusion follows an almost five-year investigation, launched by the Commission in December 2019, to assess whether the special tax schemes applicable to public casinos operators in Germany are in line with state aid rules. The investigation followed complaints by competitors.

In Germany, public casinos operators (Spielbankunternehmen) are subject to special tax schemes (one scheme in each state, or Bundesland) that replace a series of otherwise applicable general taxes, in particular corporate or income tax and a local entertainment tax.

Based on its in-depth investigation, the Commission found that the special tax schemes entail an economic advantage for the public casinos operators in the form of a potentially lower tax burden.

The Commission also found that, as a result of the design of the special tax rules, the advantage is not automatic, and it does not materialize in all tax years and for all operators. Therefore, it will be for the German authorities to determine whether or not an advantage was granted to the public casinos operators, the Commission said.

The Commission also considered the recent modification of the special tax rules in Hamburg. In this State, the legislator proactively introduced as from January 1, 2024, a new equalization tax to be paid by the public casinos operator. This tax is paid in case the operator's tax burden under the special tax rules is below the tax burden it would bear under the normal tax rules. The Commission considered that this mechanism automatically prevents the operator from being granted an advantage, so that the special tax rules in Hamburg do not constitute state aid as from January 1, 2024.

The Commission concluded: "Germany must now recover the incompatible aid, plus interest. As Germany will have to determine whether or not an advantage was granted to the public casinos operators and, if so, determine the amount to be recovered from each potential beneficiary of the incompatible aid, the total aid amount to be recovered is not known at this stage."