Swede beats tax agency in landmark gambling case

A poker player from Sweden has won an important decision against the Swedish Tax Agency (Skatteverket), freeing him from paying taxes on a portion of his online poker winnings.

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The county administrative court (Länsrätten) in Östergötland ruled that Sargon Rüya did not have to pay Swedish taxes on the 650,000 kronor ($80,900) he won playing online poker on a site based in the Isle of Man, reports the Östgöta Correspondenten newspaper.

However, Rüya was still liable for paying taxes on winnings earned while playing on a site based in Monaco.

The difference in tax treatment stems from European Union rules stipulating that winnings from games such as poker are free from taxes within the EU.

As the Isle of Man site was operated by a company based in Cyprus, which is a member of the EU, poker winnings earned there are tax free, whereas those earned in Monaco, which is not a member of the EU, are subject to tax.

Skatteverket had originally requested that Rüya pay taxes on his Isle of Man winnings because only certain EU tax rules apply on the island, which is considered a dependency of the UK, but is not part of Britain or the EU.

If Rüya wanted to avoid paying tax, argued the agency, he would have to provide evidence that the winnings came from within the European Union.

Eventually, Rüya was able to show that the Isle of Man poker site was owned by a company based in Cyprus and thus that the winnings were indeed earned within the EU.

However, the court's ruling obviated Skatteverket's request, by tossing out Skatteverket’s line of reasoning altogether.

According to the court, even if a country doesn’t subscribe to all EU rules, an individual can refer to an EU rule which is sufficiently precise and unconditional, such as EU gaming rules.

In other words, the agency can't place the burden of proving where a foreign company's operations are based in order for them to avoid paying taxes.

"The resources for this ought to most appropriately lay with Skatteverket," wrote the court in its ruling.

Rüya is happy to put the incident behind him, but doesn’t appreciate the way the case was handled by the authorities.

“It’s not easy for an individual to fight Skatteverket and it feels as if I’ve been a lab rat in their attempt to tax gaming,” he told the newspaper.

Rüya believes that Sweden should reclassify poker from a game of chance to a game of skill but is hesitant to do so because of the country’s own gaming monopoly.

“The reason the state doesn’t want to is that it wants to protect its [Svenska Spel] gaming monopoly. If poker becomes a game of skill then the state would be forced to let other gaming companies operate and allow poker tournaments in Sweden,” said Rüya.