Status of licences for sportsbets, VAT on services rendered electronically


Permission of online sport betting providers in Germany

The gambling market is strictly regulated under German law, with the operation and organising or facilitating of public games of chance on the internet prohibited (sec. 4 para. 4 of the state treaty on gaming 'GlüStV' 2012). Exceptions are permitted only under strict conditions. However, in reality there is a largely unregulated gambling market in Germany, which public regulation appears to have failed to prevent1. In the following, we present the current legal situation and political debate.


The operation and organising or facilitating of public games of chance may only be performed with the permission of the competent authority. The current basis for this procedure, on which the federal states have agreed, is the GlüStV 2012. Based on this treaty, the federal states have enacted state gambling laws, each implementing its own decrees. 

Under the previous GlüStV 2008, the operation and organising or facilitating of games of chance over the internet was prohibited without exception. Only the State was allowed to operate sports betting, with organising or facilitating only allowed at state lottery retail locations. Pursuant to the GlüStV 2012, the operation and organising or facilitating of games of chance over the internet is still prohibited, although an 'experimentation clause' exists which provides exceptions in respect of lotteries and sports betting, with the operation and organising or facilitating of sports betting over the internet requiring a licence.

Under the GlüStV 2012, from July 2012 the operation of sports betting was permitted on a trial basis for a seven year period. However, a licence is still required, with a limit of 20 licences allowed to be allocated throughout the country. Hesse is the competent state for the allocation of these licences and is supported by a gambling committee for this purpose. European-wide bidding for the licences started in August 2012.

However due to a decision of the Administrative Court of Wiesbaden2 in 2014, subsequently confirmed by the Higher Administrative Court3, the licences could not be granted. Following an emergency appeal of this decision in 2015 by a sports betting provider, the Administrative Court of Wiesbaden4 required the granting of licences to be postponed. This decision was confirmed by the Higher Administrative Court on the ground that the supreme gambling supervisory authority of the states, the gambling committee, is unconstitutional.5

The Higher Administrative Court stated that the distribution of responsibilities according to the GlüStV 2012 contradicts the federal system of the German constitution (Grundgesetz, 'GG'). The GG provides that the public authority has to be exercised either by the federation (Bund) or the states (Länder).

The (contractual) creation of a 'third level' violates the federal system.

Furthermore, the Higher Administrative Court stated that the gambling committee is not sufficiently democratically legitimated. By creating the gambling committee, the states created an institution with the competence to take binding decisions for all states in an area with implications for fundamental rights, without, however, ensuring that this was established with the appropriate controls and monitoring procedures. As a result, it appeared that the procedure for granting sports betting licences would be on hold for the foreseeable future.6

Current actions against illegal providers

As previously mentioned, a largely unregulated gambling market exists in Germany. This has been encouraged partly by the courts suggesting that the delay in granting of licences is not attributable to the sports betting providers and that they should therefore not be penalised by the current law7. In addition, the authorities want to avoid judicial disputes and damages claims.8 As an example, the sports betting provider "Tipico" operates at over 850 sports betting locations, none with a gambling law licence.9 Furthermore, the administrative authorities have practical problems applying prohibition orders to sports betting providers.10 The ability to block cash flows under the GlüStV 2012 has not yet been invoked, but the competent state Lower Saxony has announced that it may do this in future.11


On 4 February 2016, the European Court of Justice12 (EuGH) indicated that the illegal sports betting monopoly in favour of the German State (resulting from the previous GlüStV 2008) still exists. Essentially, the EuGH stated that the EU principle of freedom to provide services prohibits (both under the previous and current law) the authorities from punishing private economic operators because they offer sports betting without a licence. However, this decision only concerns land-based betting operators. As online sports betting was totally prohibited under the GlüStV 2008, no state monopoly arose which could have been consolidated under the GlüStV 2012.13 Therefore, in respect of online sports betting, no violation of European law has occurred.14

Until a few days ago, the reaction of the German legislature was unclear. According to German legal literature, the willingness of politicians to modify the licence procedure is very limited.15 The state lottery offices classify the decision of the EuGH as an endorsement of the GlüStV 2012 (see here and here). However, the need for reform is supported by the Ministry of the Interior of Hessen, which supports the abolition of the limitations on the number of licences (20) and monthly bets (EUR 1,000). Although Hesse is the competent authority for the granting of licences, it has no greater influence regarding the revision of this procedure than other states. Furthermore, as the illegal providers benefit from the current legal situation, an initiative for reform from this group is not expected.16 Nevertheless, as the administrative regulation of gambling is the responsibility of the states and the states are not obliged to coordinate their gambling laws,17 there is a possibility that one state could enact a different gambling law to others.

In an effort to end the political and legal stalemate mentioned above the government of Hesse announced on March 15th18 that it will propose a new GlüStV which would both cover the concerns raised by EuGH and the German Administrative Courts. The proposal in essence no longer limits the number of licences that may be issued but instead entitles anyone who complies with the applicable rules to a licence. With respect to online gambling a betting limit of EUR 1,000.00 is replaced by a loss limit of EUR 1,000.00. In cases where a higher creditworthiness is proven, the loss limit can be increased. Registration and identification procedures are simplified. A unified data base for "blocked" gamblers will be introduced that will cover all types of gambling. In order to centralise supervision the Federal States will set up a corporate entity under public law, Gemeinsame Anstalt für Glücksspielaufsicht (Anstalt des öffentlichen Rechts) to issue the licences and supervise the market participants. As in the existing GlüStV it is proposed to levy a gambling duty at 20% of the operators' gross gambling revenue. The proposed new GlüStV does not yet provide for an effective date. As it is an agreement among the German Federal States (Bundesländer), it needs to be signed by at least two of them to take effect among its parties. The draft provides that it would become effective with respect to further Federal States once they have acceded to it.

Guidance of the German Inland Revenue Office relating to electronically provided services

By way of introduction, if a B2C betting service constitutes an electronically supplied service (ESS) the place of supply is where the player is established. If it does not constitute an ESS, the place of supply is where the supplier is based. Accordingly the question is fundamental in deciding where a betting transaction is taxed, and which jurisdiction's VAT laws are relevant.

This is a difficult question particularly as the definition of ESS according to EU VAT law requires there to be "minimal human intervention" and this phrase is open to different interpretations.

The German Inland Revenue Office has published guidance on the meaning of electronically supplied services. It defines services rendered electronically in sec. 3a.12 para. 1 sentence 1 of the German value added tax application decree (Umsatzsteuer-Anwendungserlass, "UStAE") as services provided via the internet or an electronic network, including networks for the transmission of digital content, whose performance is highly dependent on information technology. These services are mostly automated, performed with minimal human participation and would not have been possible without information technology. This is generally the same definition as that used in the EU Regulation 282/2011.

The German Inland Revenue Office has also created a list of services that fall under the above definition. Pursuant to this list (sec 3a.12 para 2 UStAE) software; amendments or updates to software; services that provide or enhance a presence in electronic networks for personal or business use (such as websites); services generated automatically by a computer over the internet or other electronic network upon entry of certain data by the service recipient; and other automated services for which the internet or another electronic network is required to perform such services (such as online market platforms) all fall under this definition. In particular, pursuant to sec. 3a.12 para. 3 no. 7 UStAE, the provision of movies and games through the internet, including gambling and lotteries, (which according to German legal literature includes sports betting)19 meets the requirements for a service provided electronically. Given the above definition, sports betting provided it satisfies the definition of an ESS would qualify as an electronically supplied service under the legal practice of the German Inland Revenue Office (although it would depend on the human intervention involved).

Consequences of the Regulatory Status Quo for VAT

From a German tax law perspective the question whether a certain business or business transaction is illegal, constitutes a criminal offence or requires a licence is irrelevant for taxation purposes, because pursuant to Sec 41 AO (Abgabenordnung, German General Tax Code) an illegal business transaction shall not be disregarded for tax purposes, as long as the parties to the business transaction or relationship fell bound by their mutual agreement and perform their "obligations" under such agreement as if it were valid. Consequently sports betting transactions offered to consumers would be subject to VAT in the country where the service recipient is established if it constituted an ESS even if such services are offered without the required business

licence. With respect to VAT the application of the gambling exemption needs to be carefully reviewed. With respect to Germany (§ 4 Nr 9 lit b UStG) gambling as an ESS would be VAT exempt, provided that such service is subject to the Lottery duty. It goes without saying that not declaring and paying VAT or Lottery duty that has become due may constitute a criminal offence.

1 Becker, ZfWG 2015, 410 (410).
2 VG Wiesbaden, decision dated 17 September 2014 - 5 L 1428/14.WI.
3 VGH Kassel, decision dated 07 October 2014 - 8 B 1686/14.
4 VG Wiesbaden, decision dated 05 June 2015 - 5 L 1453/14.WI.
5 VGH Kassel, decision dated 16 October 2015 – 8 B 1028/15.
6 Becker, ZfWG 2015, 410 (413)
7 Becker, ZfWG 2015, 410 (413)
8 Becker, ZfWG 2015, 410 (413).
9 Becker, ZfWG 2015, 410 (410 et seq.).
10 Becker, ZfWG 2015, 410 (413).
11 Becker, ZfWG 2015, 410 (414).
12 EuGH, decision dated 04 February 2016 - C 336/14.
13 Ruttig, EuGH rügt Übergangsreglungen im Glücksspielrecht: Ein Pyrrhussieg für Online-Sportwettangebote, in Legal Tribute Online, 11.02.2016
14 Ruttig, EuGH rügt Übergangsreglungen im Glücksspielrecht: Ein Pyrrhussieg für Online-Sportwettangebote, in Legal Tribute Online, 11.02.2016
15 Becker, ZfWG 2015, 410 (413).
16 Becker, ZfWG 2015, 410 (413).
17 Makswit, ZfWG 2015, 430 (434).
18 Hessisches Innenministerium "Glücksspiel in Deutschland in geregelte Bahnen lenken" 15.03.2016
19 Leipold, in: Sölch/Ringleb (2015), UStG § 4 Nr. 9 recital 72