For Dutch poker players, some good news came this week, as authorities in the Netherlands finally conceded defeat in a longstanding legal battle over the taxation of players’ winnings.
The Dutch tax authorities withdrew an appeal to the Supreme Court of the Netherlands this week that sought to overturn a previous judgment that had declared winnings at the PokerStars EU client untaxable.
In November 2015, the Amsterdam Court of Appeal ruled that because the EU PokerStars is licensed in Malta, which is an European Union member state, no tax can be claimed by the Dutch government. The tax authorities, or Belastingdienst, had argued that the PokerStar EU site was not established in Malta, but the Isle of Man, which is not an EU member, and therefore its players should be liable.
But while PokerStars.EU shares player liquidity with the Isle of Man-licensed PokerStars.com, it does, in fact, operate under a license from the Maltese gaming regulator, a fact that was successfully demonstrated in court.
Breach of EU Law
Under Dutch law, gaming operators based inside the Netherlands are liable for taxation, but not players’ winnings. If that money is won outside the country, however, then the player, and not the foreign operator, becomes liable.
In July 2014, in a separate case, the Netherlands Supreme Court ruled that this differential amounts to a violation of EU law regarding the free movement of services, but only if the foreign operator is established within the EU. This case had been brought by poker players who felt taxation on winnings from land-based poker tournaments outside the country was unfair.
The same principal was applied in the 2015 case, which had been brought against the tax authorities by Dutch player Freerk Post, and therefore it was crucial for the court to accept that the PokerStars EU site was based in Malta.
In fact, European Union status was the principal reason why PokerStars chose to license its dot-EU client in Malta, and not the Isle of Man, when it launched in February 2012. ’Stars said its intention had been to “remove any existing uncertainty regarding taxation of players’ winnings,” and had persuaded players to migrate from various EU countries with the promise of tax-free winnings.
PokerStars later qualified this with the caveat: “players are responsible for determining their own tax liability.”
PokerStars, which contributed to the legal effort in the case, said it welcomed the decision to withdraw the appeal, although it warned Dutch players that the ruling applies to PokerStars.EU and may not apply to other foreign operators.
“PokerStars is pleased that the Belastingdienst has withdrawn its appeal against the Amsterdam Court of Appeal ruling that a (Dutch) player can play on PokerStars [EU site] without paying tax on winnings,” the company told the Dutch PokerNews site.
“This confirmation is great news for affected players who can play on PokerStars with the knowledge that the tax status of PokerStars [EU site] has been confirmed.”