How are pro-gamers taxed?

On January 18 2014 09:27 Kalvih wrote:
Hello there TL community,

I'm a Canadian graduate school student writing a thesis for my Master of Taxation program, and I am trying to promote legal recognition of pro-gamers (eAthletes) as athletes for the purpose of tax. I can use all of you guys' help, thank you!

I have been playing SC2 since release and is currently a gold/plat player (not entirely proud but yea). I am also an avid Dota2 player. Now I'm trying to do something for this community that I love so much, and here it is.

Athletes receive many tax relieves/benefits in the Income Tax Act and treaties and qualify for many tax deferral vehicles (ie. trusts). Having the law recognize eAthletes as athletes will not only lead to tax-savings for our beloved pro-gamers, but will also be a step towards a legal reformation surrounding eSports. As some of you know, US recently approved athlete visa for foreign pro-gamers, and I am trying to something similar, but for tax.

However, I need you guys' help for some information that I cannot find (or it may be in some other language which I cannot comprehend). I've done a fair amount of research already, but here are some unanswered questions I have:

1) What are the legal attribute of an eSports teams? Corporation? Partnership? Self-employed? Joint-venture? Other?
2) What income does a pro-gamer earn as a member of a team besides salaries and tournament winnings?
3) What are some deductions or credits currently and uniquely available to pro-gamers in European country or South Korea, if any?
4) If you are, for example, a Canadian citizen, and you win a tournament in the U.S., do you pay U.S. tax or Canadian tax on the winnings?

I may have further questions as I delve further into my paper, but any contribution would be greatly appreciated. Thanks, eSport community.


-K

P.S. If any pro-gamers or TL staff is willing, I would love more than anything to have an interview with him/her at their convenience. Just PM me. Thanks!

On January 18 2014 09:54 WonnaPlay wrote:
I'm pretty sure that Prize money is taxed in the country where you won the prize.
Source : http://www.dreamhack.se/dhs13/esport/prize-money-policy/

Also if you fill in your taxes, you are supposed to fill in any earnings in any foreign country and have it tax-deducted, so this inculdes prize earnings from tournaments (atleast it works like this in my country).
As for the other parts, I wouldn't know

On January 18 2014 15:15 B-rye88 wrote:


Shoulda done the CPA/CA program, you'd already have most of the answers.

1) It depends on the team. They are very unlikely to be self-employed or JV's.

2) It depends on the team. Some could earn commissions on advertising products, but this is going to be treated similarly to any other employment income.

Salaries are obvious, and tournament winnings would be taxable only to the extend they exceed deductible expenses (this would extend to gear, etc. that are personally purchased). Flights, gear, etc. purchased by the team would take the form of a taxable benefit. EDIT: Changed my mind, not a taxable benefit to the employee as they are required tools to fulfill their duties of employment. Stupid comment actually.

3) Well, you wouldn't have this answer in the CPA program :D

4) You would pay any U.S. taxes applicable first; Canadian taxes would then be levied on your winnings, with a credit given to taxes paid in the US.

On January 19 2014 06:51 Kalvih wrote:


Thanks, that policy outline is very helpful, I haven't thought to look there.



I am aiming to do the CPA/CA program after my Master, more focusing on the tax side of accounting, audit can wait. I do know about the ordinary deductible expenses such as travel, maybe a portion of meals&entertainment. Capital amortization deductions would be limited to the team (assuming it is a corp) and not the employee, since the setups are probably provided. I am getting at special deductions and credits; may in S. Korea they have post-secondary treatment for certain gaming academies, allowing for tuition credits to be used against future income, or deduction for paying dues toward their professional gaming licences, etc. How sure are you about your answer to 4)? It is a matter of whether the US-Canada treaty applies or not. Thanks!

On January 19 2014 09:35 B-rye88 wrote:


Because for taxation purposes, the fact that he's an e-sports athlete in particular is largely non-consequential. The type of income earned is the same, therefore the standard rule for that type of income would apply. For example, a professional poker player (bolded for emphasis as a non-professional gambler does not pay taxes on gambling winnings in Canada) who was resident in Canada who won the WSOP in LV, Nevada, would have taxes levied on his winnings by the Canadian government, with credit given for foreign taxes paid in the state of Nevada. This example is no different for tax purposes than if Scarlett won a Dreamhack. The only difference would be a) if there were specific provisions in the rule relating only to 'athletes' and b) if you could convince the CRA that Scarlett met the definition of an athlete.

EDIT: And yes, the CCA would likely be limited to the team assuming they purchased the items; otherwise we get into the fun area of personal/employment use, but in reality $ amounts would be so small that you could do whatever you wanted here and the CRA wouldn't give a fig.

On January 19 2014 11:56 Kalvih wrote:


Well that's the whole purpose of my paper, to convince CRA that e-athletes are not so different from athletes, and the government should start acknowledging them as such, lol.

I will be dedicating a portion of the thesis to differentiate the professional poker scene from eSports. And you're right, the CCA on computer is probably pretty low (even at 100% CCA rate), but maybe when there's team housing and furniture and other appliances in the team house, the deductions can be quite sizable.