Many people don’t realise the complex tax rules behind winning a poker tournament or an online hand. The taxation of poker winnings in Hungary depends primarily on the type of gambling involved. In this article, we summarise the main rules applicable to personal income tax (“PIT“) and social contribution tax (“SCT“).
From a tax perspective, the primary issue is whether gambling is “licensed” or “unlicensed”. In this article we will focus on licensed gambling, as this is the typical case. Licensed gambling includes poker, which can be organised by a licensed service provider registered with the Hungarian Tax Authority. On the other hand, if someone plays from a foreign site that does not have a Hungarian licence, it is no longer deemed “legally” organised gambling.
The difference is significant, because if the winnings are from a licensed organiser, the winnings are exempt from PIT under Section 76(4) of Act CXVII of 1995 on Personal Income Tax. And since Act LII of 2018 on Social Contribution Tax ties the social contribution tax to the Hungarian consolidated tax base, the income shall not fall within the scope of this type of tax either. In such a case, the player is therefore neither obliged to declare nor to pay taxes.
The situation is different if the prize is not from an authorised or legal organisation. In such cases, taxation can no longer be avoided: the winnings are included in the consolidated tax base and is therefore subject to both PIT and SCT. As a general rule, such winnings are considered as “other income”, i.e. the income is calculated as the difference between the income and the certified expenses. In this case, the cost is typically the stake paid into the game. 15% PIT and 13% SCT are payable on the income determined.
However, if the game is played on a regular basis for business purposes and for the purpose of earning an income – for example, if a person plays poker professionally – the winnings may be considered as income from self-employment. In this case, it is possible to deduct either the actual costs or the 10% cost-rate, the latter of which can result in a very favourable tax treatment. It is important to note that in such a case, as it is an economic activity, including the supply of services, the individual must also register for VAT; obtain a tax number; and comply with the VAT obligations under Act CXXVII of 2007 on Value Added Tax.
You must also take into account who the income derives from. If it comes from a paying agent – typically a domestic organiser – the paying agent is liable to deduct, declare and pay the tax. If, on the other hand, the prize is not from a paying agent – for example, a foreign site – then the tax liability is on the individual. In such cases, the income tax must be paid by the 12th day of the month following the quarter when the income was realised and then declared in the annual income tax return by May 20th following the affected year. SCT must also be declared and paid by the individual in the month following the month in which the income is earned – and it is important to note that there is no upper limit for SCT, unlike, for example, dividend income, which is subject to an SCT cap.
Overall, therefore, the taxation of poker winnings depends on several aspects: the licence, the regularity of the activity and the source of the income. Anyone who plays poker regularly, even for a living – particularly on unlicensed platforms – should seek the advice of an accountant or tax adviser to ensure that they are taxed correctly.
Disclaimer: this article is a translation of our original article written in Hungarian, which you can find here
