Lottoland to launch renewed appeal in €10m German VAT case

Lottoland will appeal against a Maltese court decision requiring the firm to pay more than €10m (£8.6m) in VAT from its German-facing operations.

The case centres around German tax authority claims that the supply of lottery betting is an electronic service and as such Lottoland is liable to pay VAT on all lottery betting services provided to German customers.

German authorities have claimed that no tax exemption should be applied and that VAT should therefore be levied on all bets made on Lottoland’s German website between July and December 2018.

Lottoland’s Gibraltar business has been registered in Germany for VAT purposes since January 2018. In July 2019, German tax authorities in Berlin-Neukölln sent the firm an enforcement notice for outstanding VAT monies.

Authorities in the region asked that Lottoland provide a security deposit of €8m as a guarantee of payment, which the operator later appealed on two separate occasions following legal advice.

In both cases, Lottoland argued the German tax authorities should postpone the ruling pending a full calculation of the taxes levied and that no security deposit should be paid.

Lottoland Gibraltar then received a notice that a charge was registered against it for an amount of €8.7m (excluding penalties) or €9.7m with penalties in June 2020. That August, the firm appealed again against the enforcement charge arguing that no decision had been made over its prior appeals.

The issue of VAT on lottery in Germany was also challenged by former Lottoland rival and lottery brokerage business Zeal, which won an appeal in the Fiscal Court of Hanover in November 2019 against authorities over a similar claim.

Using an EU directive concerning mutual assistance for tax reclaims and duties in various member states, German authorities enlisted the Maltese Tax Commissioner, who filed separate proceedings in the First Hall of Malta’s Civil Court in January against Lottoland’s Malta-based business.

In response, lawyers acting on behalf of Lottoland argued that the case was unenforceable and had been brought against the wrong operating entity, before providing supporting evidence of a VAT assessment by Berlin-Neukölln authorities against the Gibraltar business, and not the Malta business.

However, the presiding judge in the case ruled that since Lottoland Malta was a Malta-based business, the Maltese Tax Commissioner had a right to collect the total amount of VAT payable on behalf of the German authorities.

In addition, the judge cited the prescience of the EU directive, which grants Maltese authorities the ability to collect the outstanding monies as if it were civil debt owed to the Maltese government.

In a statement provided to EGR, Lottoland CEO Nigel Birrell said: “Lottoland will be appealing the judgment handed down on 24 April 2021 on the basis that the proceedings have been instigated by the Berlin-Neukölln tax office against the wrong company in the incorrect jurisdiction, relating to a VAT assessment which has no merits.

“Furthermore, Lottoland Limited Malta was not incorporated until 24 January 2019, which was subsequent to the period to which the VAT assessments in dispute relates, being from July to December 2018,” Birrell added.

Lottoland now has until 12 May to register its appeal in the Maltese courts.