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The eSports and online gaming is a billion-pound industry and there are notable background issues that need address in this industry. One of the most issues affecting the eSports and online gaming industry is the taxation of the profits. Most of all the eSports and online gaming operate in different countries like London, United States, Chile, Colombia, Mexico, Peru, Malaysia and Germany. They all face tax issues and they can be at corporate and, or at individual level and sometimes makes everything more complicated.
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The tax regimes have found the right way to deal with the new first growing business as a way of generating income. Each country has established a suitable formula and they vary from each other. In addition, yes, the eSports and online gaming profits are taxed.
A lot of information concerning taxation on eSports and online gaming is reviewed by different famous personalities. These people have a lot of information concerning gamers who are participating all over the world and tax issues.
Jason Feingertz for example offers good advisory information on issues of tax. Besides, he is well versed with residency [planning as well as audit defence. Having represented players and different sports franchise, he understands the eSports and online gaming industry. As the industry continues to grow and lots of profits earned, the tax man is interested in doing some deductions.
How is taxation carried out in UK?
Most organisations operate out of the country but have teams anywhere in other countries like the USA, Asia and the rest. The tax issue in this way can be somehow complex depending on the level it is applied. Because the tournaments are carried out all over the world, prizes are distributed out with the companies involved in given countries. The winnings are thereafter distributed accordingly to the multinational winning teams. Evading tax collection has its consequences that might include imprisonment in other countries, penalties or big fines.
Any team in eSports get tax deductions the same way a self-employed individual is deducted. It is the same when you are a golfer, cyclist or any other sports. It is totally different when you are a footballer who is employed by the club.
In this case, eSports is not mandated to be deducted PAYE and have no obligation of contributing the national insurance for the employer. Tax is therefore applied to players in the residential nation
Let’s have a look at some of the countries that tax eSports and online gaming:
United States
The United States tax eSports and online gaming and this enforcement was added in the US Constitution as a way of getting more money. This law affected non-residential athletes who enter the United States to earn a living through sports. Athletes in NFL, NHL, NBA and MLB have been on the receiving end of tax collection. This is because such athletes earn huge sums of money. It is quite not clear as to how many competition hosts have already complied with the enforcement.
Athletes who have their residence in Florida including the Heat Check and Magic teams are exempted from state tax for streaming their home earnings. However, they are not exempted from paying the New York non-residential tax when they win on games while in New York NBA 2K studio.
Chile
Just like any other country, eSports and online gaming are becoming common in Chile. This is a profiting industry with gamers rewarded in different forms like sponsorship and earnings from YouTube channels publicity. Different companies have been attracted and are looking forward to exploiting the industry.
As a result, the Tax Administration in the country has taken its position to deal with tax related issues. The Tax Compliance Plan 2019 was implemented with the purpose of creating a playing level platform that is befitting every participant in the game.
Any earning by professional gamers, also known as influencers, incurs a progressive tax rate of up to 35%. This was implemented by the Tax Administration of Chile. Any non-compliance faces auditing and might be fined huge sums of money by the government.
The Chile Administration also has a digital economy tax bill that is being discussed by the congress. It is still unclear whether this might affect all digital economy issues like eSports and online gaming.
Colombia
The eSports and online industry in Colombia is also growing at a rapid state with participants getting lots of profits. With the Golden League, which is the Professional Videogame League and League of Legends competition now in Colombia, the stakes are high for gamers.
According to Colombia Sports Leadership as well as the Positioning Organisation, eSports is not a sport. This is owed to the fact that there are some sort of contractual obligations for the services offered hence players meet the same tax deductions. However, it is yet for the Tax Administration in Colombia to provide regulations that differentiate professional gaming income from the conventional income.
Rules of taxation are applied equally to all citizens who are subject to taxation however if there are extra additional earnings won through tournaments a professional gamer, prize taxation rules are applicable.
Mexico
The eSports and online gaming in Mexico is determined to grow with the Federation of eSports in the country giving it the sport legal status. Gamers in eSports in Mexico earn their income through provision of services contract. Players then can give their teams with invoices or can be employed and then earn an income. In whichever way, there is a normal tax rate of 36% applied on each player. This is effective if it is under a services contract.
There are also different approaches applied concerning every age. Players who are less than 16 years in the country for example are highly challenged to make registration while those who are between 16 and 18 years registering through salary schemes.
ESports teams in Mexico recommend services contracts owing to the fact that the eSports are not categorised in the tax legislation provided. This makes it easier when it comes to tax filing issues.