Spain’s tax authorities are continuing their long-arm efforts to collect back taxes allegedly owed by international players who have won major amounts of cash at Spanish events.
Prominent poker professionals from Germany and other countries appear to be suffering the wrath of Spanish tax authorities over unpaid taxes still owed on major tournament wins from years past. One of Germany’s leading poker-discussion forums, PokerFirma, recently reported on the case of German pro Hossein Ensan, from whom Spain’s Dependencia Regional de Gestión Tributaria de Cataluña (Regional Tax Management Unit of Catalonia) is seeking €235,433.67 (£211,144.40; $272,440.21).
The amount represents Ensan’s winnings of €214,643.67 (£192,509.07; $248,364.80) as part of a three-way chop at the 2014 EPT (European Poker Championship) Barcelona main event, plus €20,790 (£18,646.71; $24,057.51) in interest assessed against Ensan last month. Spain’s Catalonia Province includes Barcelona, and the regional unit has tax-collection oversight for the EPT/PokerStars Live! events.
Ensan made the matter public via PokerFirma, which has since determined that a handful of other pros, from Germany and other countries, have received similar back-tax demands from the Catalonian agency. Some of them may stretch back for as much as a decade. PokerFirma also named pro player Dragan Kostic as being similarly targeted for back taxes, and stated that “several German-speaking players have already received mail from the Spaniards.” Ensan contacted German tax authorities about the Spanish claim, since he had already paid taxes there on the win, and was thus faced with the prospect of double taxation that would soak up most of his earnings from the event.
Tax differences apply, despite treaty
Among the issues raised is the fact that Germany and Spain have a reciprocal tax treaty governing earnings in one country by a citizen of the other. Those agreements have been in place since at least 1966 and are designed to prevent double taxation, but profits derived from gambling is a special category where the general rules don’t necessarily apply, at least in the eyes of the Catalonia taxmen.
Spain, in general, has one of the most repressive tax regimes in all of Europe regarding gambling income. Tax code changes in 2012 clarified that only same-period losses from gambling can be deducted from winnings and cannot be carried forward to offset past or future capital gains. At that time, Spain’s gambling codes underwent a comprehensive overhaul, which also included new rules for online-gambling taxation, as well as a firewalling of the country to bar operators not licensed in Spain from offering their services to the country’s gamblers.
Ensan’s situation confirms that Spanish tax authorities are reviewing years of poker winnings for all sorts of players with possible tax liabilities, whether money was won live or online, or by native Spaniards or others visiting the country. This wave of tax-liability notifications comes not that long after the tale of Spanish chess grandmaster Francisco Vallejo Pons. Pons, Spain’s youngest-ever grandmaster, was notified of a potential tax liability of more than €500,000 (£448,475; $578,622.50) simply because he played a lot of online poker around 2011.
Spain’s online-poker tax codes were even more draconian before being somewhat softened in 2012. Pons was assessed the half-million-euro penalty despite having lost more online than he won, since the 2011 version of the law wouldn’t even let him deduct his losses from his wins on a daily basis, meaning he was deemed to owe taxes on his gross gambling winnings.
Future Spanish poker galas in jeopardy?
The ongoing collection efforts by the Spanish tax agencies may also represent a threat to such large-scale poker events such as the EPT Barcelona stop, preliminary events of which are getting underway this week. Extensive commentary on the original PokerFirma report shows high concern from many touring European pros.
Those pros are likely to view the double-taxation possibility as a disincentive to attend Spain-based poker events. One such poster claimed that dozens of his German poker-playing associates were planning to cancel their plans to attend, while others suggested they may focus on cash games rather than tournaments, since cash-game profits are not recorded in major online databases.
PokerFirma also reported contacting PokerStars about the Spanish tax situation. PokerStars did not offer an official position on the matter but advised all players to contact their local tax authorities.