Should wage taxes apply
Taxing lottery winnings: These rules apply
Winning the lottery is an all-round nice thing: the workload is very manageable, the amounts are often very worthwhile - and the tax office does not even expect you to pay tax on your lottery winnings. At least not right away. However: There are also some tax peculiarities in connection with winnings from games, betting and lottery winnings that you should be aware of, especially if you win big.
Basically, game winnings do not have to be taxed in Germany. The reason for this, however, is not, as is often assumed, a general tax exemption for betting and lottery winnings, which the legislature deliberately granted. Rather, the following applies: In Germany, winnings are not assigned to any of the seven types of income on which the state levies income tax in various forms. They are therefore simply “not controllable”, as it is called in technical jargon.
In practice, this difference is irrelevant - at least as far as the army of casual gamers is concerned. You do not have to pay tax on your lottery winnings.
The situation is different, however, when profits flow regularly and in considerable amounts - and become a real source of income, comparable to an income as an employee or self-employed. For example, some professional players have already been shipwrecked in court because they have regularly and successfully participated in poker tournaments, cash games or Internet events over several years. Particularly bitter: In many cases, the courts not only confirmed the income tax liability of the profits made by the tax office, but also considered the taxation of sales to be justified (e.g. Münster tax court, file no. From your point of view, the professional players concerned should be treated like entrepreneurs, with all the consequences for income tax and sales tax.
Taxing lottery winnings: Tax advice is always recommended
But even if you don't have to worry that you would have to pay tax on the one-time lottery winnings: You still have to expect medium and long-term tax consequences. The reason: You do not pay any income tax on betting or lottery winnings - but you do pay on the income that you generate with your winnings in the following years. Conclusion: A lottery win may result in taxes in subsequent years that result from income generated with the lottery win. For example, once you have won the Euro Jackpot, that profit is tax-free. However, the income from the investment of the profit usually does not.
For example, if you invest your lottery winnings in the purchase of real estate and generate rental income from it, you must pay tax on this rental income. The same applies to all other taxable income, from capital gains - such as interest or dividends - to corporate profits from a purchased investment or company.
Therefore, if you win big lottery tickets, you should think very carefully about how you want to invest the money in the medium term and invest it in a tax-optimized manner. From a tax point of view, it is usually advisable to consult a professional (asset or tax advisor).
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