Germany's tax rules for public casinos 'incompatible with EU State aid rules'

(BRUSSELS) - Germany's special tax schemes for public casinos operators are not in line with EU State aid rules, the EU concluded Thursday, saying the tax schemes must be abolished and State aid recovered.

"Germany must now recover the aid, put an end to the special tax regime and ensure that public casinos pay the same taxes as private casinos," said EC vice-president Margrethe Vestager.

The EU executive had opened an in-depth investigation 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 of the public casinos.

In Germany, public casinos operators (Spielbankunternehmen) are subject to special tax schemes (one scheme in each State, 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 in comparison to the normal tax rules.

The Commission also found that, as a result of the design of the special tax rules, the advantage is not automatic, and does not materialize in all tax years and for all operators. It will therefore be for the German authorities to determine whether or not an advantage was granted to the public casinos operators, says the Commission. According to its preliminary calculations, the recent reductions of the special taxes in certain States may have led to advantages for at least some of the operators active in those States.

The Commission also considered the recent modification of the special tax rules in Hamburg. In this State, the legislator proactively introduced as from 1 January 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 1 January 2024.

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.

The non-confidential version of the decision will be made available under the case number SA.44944 and SA.53552 in the State aid register on the Commission's competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.