Tax on prize money as a professional athlete: what applies to tournaments?

Do I have to pay tax on prize money as a professional?

The starting point is Section 1(1) EStG: natural persons who have a residence or their habitual abode in Germany are subject to unlimited income tax liability. With her residence in Frankfurt, Jana is.

What is taxed is governed by Section 2(1) EStG. It lists seven types of income, from agriculture and forestry to other income. Prize money is therefore only taxable if it falls under one of these types. Which type it belongs to is determined by Sections 13 to 24 EStG.

For individual athletes, the main candidate is a commercial business. Under Section 15(2) EStG, an activity is a commercial business if it

1. is independent,
2. is carried on in a sustained manner,
3. is undertaken with the intention of making a profit (under sentence 3, a secondary purpose is sufficient), and
4. constitutes participation in general economic commerce,

and if it is neither agriculture and forestry nor a liberal profession nor other self-employed work.

For tournament poker, the BFH has ruled that participation can be a commercial business and that a success-dependent remuneration does not preclude participation in the market (BFH, judgment of 16 September 2015, X R 43/12). This is not a ruling on tennis, golf, darts, equestrian sport or e-sports.

Takeaway: In Jana's case, her series of tournaments, the fact that she bears her own costs and prize money as a source of income are reasons to work through the features of Section 15(2) EStG, including the demarcation, seriously. The result remains a question of the individual case that you should have clarified with your documents before you file your first return.

Commercial business, self-employed work or employment income?

Besides a commercial business, two further types of income come into consideration.

• Self-employed work: Section 18(1) EStG lists liberal professional activities and professions. Sport is not in this list. Whether an athlete pursues a "similar profession" (ähnlicher Beruf) is not established by the sources read here.
• Employment income: Under Section 19(1) EStG, income from employment also includes "other remuneration and benefits for employment" (andere Bezüge und Vorteile für eine Beschäftigung), irrespective of whether they are one-off or recurring. If a club pays you a bonus as your employer, it falls under Section 19 according to this wording.

Demarcation: one-off prizes outside sport. Anyone who wins a prize once without acting in a professional capacity can at most fall under Section 22 no. 3 EStG. The provision covers "income from services" (Einkünfte aus Leistungen), and only on a subsidiary basis, where no other type of income applies. If this income is less than EUR 256 in the calendar year, it is not subject to income tax under sentence 2. For prize money from a television programme, the BFH has ruled that it falls under Section 22 no. 3 if it is consideration for conduct by the participant. It distinguished winnings from bets, lotteries and other games of chance "insofar as they arise outside a business or professional activity" (soweit sie außerhalb einer betrieblichen oder beruflichen Tätigkeit anfallen) (BFH, judgment of 24 April 2012, IX R 6/10). The criterion is therefore: a service in return for the prize, or mere luck. This does not yield a blanket answer for every quiz or prize draw.

Takeaway: First sort every payment by its source: tournament organiser, club as employer or one-off prize outside sport. Only then is it worth asking how high the tax will be.

Florian Enders on the taxation of tournament prize money in professional sport

When does the prize money count and which costs reduce the profit?

Timing: Under Section 11(1) sentence 1 EStG, income is received in the calendar year in which it accrued to the taxpayer. Under sentence 2, regularly recurring income that accrues shortly before the beginning or shortly after the end of the calendar year to which it economically belongs is deemed to have been received in that calendar year. Whether this concerns an individual tournament payment is a question of the individual case. Sentence 5 also leaves the determination of profit by comparison of business assets (Section 4(1), Section 5 EStG) unaffected. Anyone who prepares balance sheets therefore cannot rely solely on the date of receipt.

Determination of profit: Under Section 4(3) EStG, taxpayers may report the surplus of business income over business expenses as profit if they are not legally obliged to keep books and regularly prepare financial statements, and if they in fact do not keep books or prepare financial statements. Whether an athlete is obliged to keep books is not analysed in this article.

Costs: Under Section 4(4) EStG, business expenses are expenses caused by the business. This is the standard for travel, coaching and entry costs. Section 4(5) EStG nevertheless excludes or limits the deduction of certain expenses. For additional meal expenses, no. 5 refers to Section 9(4a) EStG, which is not analysed here. This article therefore does not state any flat rates.

Takeaway: For each tournament, Jana should record the payment date of the prize money and keep all receipts together with the relevant tournament. The business reason must be recognisable for every single expense.

2026 calculation scheme: how is income tax calculated?

The following scheme only shows the method of calculation. It is not a statement of what Jana or you will actually pay.

Assumptions: individual assessment under the basic tariff, no children, assessment period 2026, taxable income of EUR 100,000, no tax reduction for trade tax, no foreign tax, no income tax under Section 32d(3) and (4) EStG, no church tax. Taxable income is not the prize money. It only arises after deduction of business expenses and further deductible amounts (Section 2(2) to (5) EStG).

1. Tariff: For taxable income from EUR 69,879 to EUR 277,825, the formula under Section 32a(1) EStG from 2026 is 0.42 times x minus EUR 11,135.63. This gives EUR 42,000 minus EUR 11,135.63, i.e. EUR 30,864.37. The tax amount is rounded down to full euros: EUR 30,864.
2. Solidarity surcharge exemption limit: Under Section 3(3) SolZG 1995, where the basic tariff applies, the surcharge is only levied if the assessment basis, reduced by income tax under Section 32d(3) and (4) EStG, exceeds EUR 20,350 (in cases of income splitting under Section 32a(5) and (6) EStG, EUR 40,700). On income tax under Section 32d(3) and (4) EStG itself, the surcharge is levied irrespective of the exemption limit; no such tax is assumed in the example. Here the exemption limit is exceeded.
3. Amount: Under Section 4 SolZG 1995, the surcharge is 5.5 percent, i.e. EUR 1,697.52. However, it is no more than 11.9 percent of the amount by which the assessment basis exceeds the exemption limit: 11.9 percent of EUR 10,514 is EUR 1,251.16, fractions of a cent are disregarded. The lower amount applies: EUR 1,251.16.
4. Total: EUR 32,115.16 in income tax and solidarity surcharge under these assumptions.

Takeaway: If a single assumption changes, such as the type of assessment, children or trade tax, the result changes. Always base your own calculation on your actual figures.

Is trade tax payable on prize money?

If your activity is a commercial business, the question of trade tax arises. Under Section 2(1) GewStG, every stationary commercial business (stehender Gewerbebetrieb) is subject to trade tax insofar as it is operated in Germany. It is operated in Germany insofar as a permanent establishment is maintained there. Whether a travelling individual athlete has such a permanent establishment is not clarified in this article.

The basis is the trade income. Under Section 7 GewStG, this is the profit determined under the Income Tax Act, increased and reduced by add-backs and reductions that are not analysed here.

Section 11 GewStG governs the base assessment amount (Steuermessbetrag). The trade income is rounded down to full EUR 100, reduced for natural persons by an allowance of EUR 24,500, but at most by the amount of the rounded trade income, and multiplied by the tax rate factor of 3.5 percent. Assume the trade income is EUR 100,000: EUR 100,000 minus EUR 24,500 gives EUR 75,500, and 3.5 percent of that is a base assessment amount of EUR 2,642.50. How the municipality determines the trade tax payable from this is not analysed in this article. It therefore does not state a trade tax amount in euros.

Two consequences follow directly from the wording:

• Under Section 35(1) EStG, income tax on commercial income is reduced by four times the assessed base assessment amount. The reduction is limited by the tax amount proportionately attributable to the commercial income (maximum reduction amount) and, under sentence 5, by the trade tax actually payable.
• Under Section 4(5b) EStG, trade tax is not a business expense.

Takeaway: First clarify whether a stationary commercial business with a permanent establishment in Germany exists; this article does not analyse the separate rule for itinerant trade businesses in Section 35a GewStG. Only then is a trade tax calculation reliable, and only then can the reduction of income tax be quantified.

Is prize money subject to VAT?

Under Section 1(1) no. 1 UStG, VAT applies to supplies of goods and other services that an entrepreneur carries out in Germany for consideration in the course of his business. Under Section 2(1) UStG, an entrepreneur is anyone who independently carries on a commercial or professional activity; any sustained activity to generate income is sufficient, even without the intention of making a profit.

The decisive question is whether the prize money is consideration for a service. There are two BFH decisions on this:

• Placement-dependent prize money: Prize money that a rider receives from the organiser or the horse owner for successful participation in a tournament is not consideration for a taxable service by the rider (BFH, judgment of 10 June 2020, XI R 25/18).
• Placement-independent remuneration: If the organiser pays a remuneration that does not depend on placement, participation is a service for consideration (BFH, judgment of 30 August 2017, XI R 37/14, poker tournament, headnote 2).

These decisions concern equestrian sport and poker. Whether tennis, golf, darts or e-sports are to be assessed in the same way seems likely, but has not been expressly decided.

Place of supply: If there is a service, for example with an appearance fee, the place matters. Under Section 3a UStG, another service rendered to an entrepreneur for his business is in principle carried out where the recipient operates his business (para. 2). Sporting services to a recipient who is neither an entrepreneur for whose business the service is carried out nor a non-entrepreneurial legal person with a VAT identification number are carried out where they are actually performed (para. 3 no. 3 sentence 1). If the services are transmitted by streaming or otherwise made available virtually, sentence 2 makes the place where the recipient is established or has his residence or habitual abode the relevant place. What consequences a place of supply abroad triggers there is not analysed in this article.

Small business: Under Section 19(1) UStG, the turnover of an entrepreneur established in Germany is exempt if total turnover did not exceed EUR 25,000 in the previous year and does not exceed EUR 100,000 in the current year. Under para. 2, total turnover only comprises taxable turnover within the meaning of Section 1(1) no. 1 UStG. According to this wording, non-taxable prize money is not counted. An appearance fee is counted insofar as it is consideration for turnover taxable in Germany; this also depends on the place of supply under Section 3a UStG. Under para. 3, the exemption can be waived, with a commitment for at least five calendar years.

Takeaway: Jana should keep her payments in two columns: prize money by placement, and appearance fees or other fixed remuneration. According to the case law read here, only the second column is a candidate for VAT.

What applies to tournaments abroad?

With a residence in Germany, Section 2(1) EStG covers the income earned during unlimited tax liability. The wording contains no restriction to domestic tournaments. Jana's prize money from abroad therefore in principle belongs in her German return.

Whether tax levied abroad is taken into account is governed by Section 34c EStG, subject to several conditions:

• Credit (para. 1): What is credited is the foreign tax assessed and paid, reduced by any entitlement to a reduction that has arisen, if you are subject, with foreign income, to a tax corresponding to German income tax in the state of origin. At most, the German tax attributable to this income is credited.
• Deduction instead of credit (paras. 2 and 3): On application, the foreign tax can instead be deducted when determining income, insofar as it relates to foreign income that is not tax-exempt. If a credit is not possible, for example because there is no foreign income, the tax is to be deducted under the conditions of para. 3.
• Double taxation treaty (para. 6): If a treaty exists with the state, paragraphs 1 to 3 are in principle not applicable, and the treaty takes priority. Sentences 2 to 6, however, make individual rules applicable again: if the treaty provides for a credit, the determination of the proportionate German tax under para. 1 sentences 2 to 5 and the deduction on application under para. 2 apply accordingly. If the treaty does not relate to a tax on income of that state, paras. 1 and 2 apply accordingly. Under the conditions set out in sentence 6, para. 3 applies. Whether a treaty restricts Germany's right to tax tournament prize money is not analysed in this article.

What "foreign income" is, is defined in Section 34d EStG. Under no. 2 letter (a), commercial income counts if it is earned through a foreign permanent establishment or a permanent representative acting there, as does income of the kind referred to in numbers 3, 4, 6, 7 and 8 letter (c), insofar as it belongs to the commercial business. No. 8 letter (c) covers income from services if the person obliged to pay the remuneration has his residence, management or registered office abroad. Whether tournament prize money from a foreign organiser can be foreign income via this second variant is not clarified in this article.

For demarcation: Sections 49 and 50a EStG govern athletes without a residence or habitual abode in Germany who are subject to limited tax liability here, including the tax deduction for sporting performances given in Germany. For Jana, with her residence in Frankfurt, they are not the relevant standard.

Takeaway: At every tournament abroad, have the withholding confirmed in writing and keep the proof of the tax assessed and paid. Without this proof, none of the variants of Section 34c can be properly examined.

Your first tax return with prize money in eight steps

1. Record your tax liability: residence or habitual abode in Germany for the whole year or only for part of it.
2. Sort payments by source: placement-dependent prize money, appearance fees or fixed remuneration, bonuses from an employer, one-off prizes outside sport.
3. Have the type of income clarified: the features of Section 15(2) EStG, including the demarcation, based on your tournament schedule and your cost structure.
4. Determine the method of profit determination: cash-basis surplus calculation under Section 4(3) EStG only if there is no legal obligation to keep books and regularly prepare financial statements, and you in fact do not keep books or prepare financial statements.
5. Collect dates of receipt and receipts: the date of every payment, receipts for travel, coaching and entry costs with the relevant tournament.
6. Record tournaments abroad separately: country, organiser, amount, proof of tax withheld and paid.
7. Check VAT: show fixed remuneration separately, clarify its place of supply and check the limits of Section 19 UStG for the previous year and the current year.
8. Check trade tax: clarify the question of a permanent establishment, then trade income, allowance and base assessment amount.

Takeaway: If you document steps 2, 5 and 6 from the start of the season, you will have the basis for every further examination ready at the end of the year.

What this article deliberately leaves open

So that you can see the limits of this article at a glance, all reservations are listed here:

• Excluded: salary and advertising income in the overall picture, the tax deduction for foreign athletes in Germany, relocation abroad and your own marketing company.
• Not clarified: whether a particular sport is to be classified as commercial or as a "similar profession" under Section 18 EStG; quiz and television prizes in the individual case; prizes in kind; the division of prize money within a team or in doubles; whether a tournament payment counts as regularly recurring income under Section 11(1) sentence 2 EStG.
• Abroad: double taxation treaties and whether they restrict Germany's right to tax, foreign tax law, withholding tax and the allocation under Section 34d EStG for tournament prize money.
• VAT: transfer of the rider and poker decisions to other sports, input tax deduction, consequences of a place of supply abroad.
• Trade tax: permanent establishment of a travelling athlete, whether an itinerant trade business under Section 35a GewStG exists, add-backs and reductions, the municipal multiplier.
• Calculation scheme: the exemption limit of the solidarity surcharge is taken from the version retrieved on 5 November 2026; the Act's separate application rule for individual assessment years has not been analysed. Additional meal expenses under Section 9(4a) EStG and a possible obligation to keep books have not been analysed either.

Frequently asked questions

Does the EUR 256 limit also apply to professional athletes?

According to the wording, it only applies to income from services under Section 22 no. 3 EStG. This provision only applies if no other type of income exists. If your prize money is commercial, the limit plays no role.

Is an appearance fee treated differently from prize money?

For VAT, possibly yes. In a poker decision, the BFH classified a placement-independent remuneration paid by the organiser as consideration for participation (headnote 2), but not the placement-dependent prize money of a rider. Whether an appearance fee is taxable in Germany also depends on the place of supply. For income tax, both payments are income if the activity can be allocated to a type of income.

Can I offset tax withheld abroad in Germany?

Only subject to conditions. Without a double taxation treaty, a credit under Section 34c(1) EStG comes into consideration if you are subject, with foreign income, to a tax corresponding to German income tax in the state of origin. What is credited is the tax assessed and paid, reduced by any entitlement to a reduction that has arisen, at most the German tax attributable to this income. Instead of a credit, a deduction is possible on application, insofar as the tax relates to foreign income that is not tax-exempt. If a treaty exists, these rules are in principle not applicable, and the treaty takes priority. Section 34c(6) sentences 2 to 6 EStG, however, make individual rules applicable again, for example the determination of the creditable tax and the deduction on application, if the treaty provides for a credit. This article does not analyse either for individual states.

Do I automatically pay trade tax as a professional?

No, not automatically. The requirement under Section 2(1) GewStG is a stationary commercial business with a permanent establishment in Germany. Section 35a GewStG contains a separate rule for itinerant trade businesses; whether an athlete falls under it is not analysed in this article. For natural persons, the trade income is also reduced by an allowance of EUR 24,500, at most by the amount of the rounded trade income, before the tax rate factor is applied.

Does all this also apply to darts, golf, equestrian sport and e-sports?

The features in the statute are the same for all sports. However, the BFH decisions on tournaments read here only concern equestrian sport (VAT) and poker tournaments (income tax and VAT). No ready-made classification can be derived from them for darts, golf, tennis and e-sports.

Further reading in this topic area

• Topic overview: professional athletes and asset protection
• Asset planning for professional athletes
• Exit tax for professional athletes

If you would like to have your own situation assessed, you can book an appointment online or leave a message via the contact form.

Sources and status

Statutory texts: official versions on gesetze-im-internet.de, retrieved on 5 November 2026 (EStG, GewStG, SolZG 1995, UStG; the individual provisions are linked in the text). Case law: BFH X R 43/12, IX R 6/10, XI R 25/18 and XI R 37/14, each linked in the text. The case of Jana K. is fictional, and all amounts are assumptions.

Legal notice

This article is for general information only and does not constitute individual tax or legal advice. It is limited to German tax law for persons resident in Germany and does not analyse any foreign law. Tax matters require individual examination. Advisory services are provided exclusively on the basis of an express engagement agreement. Full legal notices at florian-enders.de/en/disclaimer.