E-sports Non-Profit Status: Tax Act 2025 | IT-Medienrecht

The Tax Amendment Act 2025: Why E-Sports' Charitable Status Was Overdue

On September 10, 2025, the Federal Cabinet passed the government draft of the Tax Amendment Act 2025 and submitted it to the Bundestag. This draft proposes that e-sports be explicitly defined as a charitable purpose within the meaning of Section 52 para. 2 sentence 1 no. 21 AO (promotion of sport).

This long-awaited change would close a significant legal loophole. For years, this ambiguity has complicated operations for clubs, associations, event organizers, and marketers in the e-sports sector. As it stands, adoption is expected before the end of 2025, though formally, it remains a government draft until then.

Simultaneously, the draft introduces several simplifications under charitable law. These are highly relevant for both e-sports structures and traditional sports clubs:

• Increase in the exemption limit for taxable business operations to €50,000 (Section 64 (3) sentence 1 AO).
• Elimination of the allocation of spheres for income up to €50,000 (Section 64 (3) sentence 2 AO).
• Increase in the limit for the obligation to use funds promptly to €100,000 (Section 55 (1) no. 5 sentence 4 AO).
• Increase in the lump sum for training managers and voluntary work from 2026 to €3,300 and €960 respectively (Section 3 no. 26, 26a EStG).

These points are integral to the current overview of the Tax Amendment Act 2025. They are as crucial for the practical operation of e-sports organizations as the non-profit status issue itself.

Important for classification: The intended recognition specifically relates to non-profit law. Other areas of law, such as state sports funding laws or association law, are not automatically covered. Therefore, separate legislation or statutes may still be required for specific funding scenarios, German Olympic Sports Confederation (DOSB) issues, or sport-specific privileges.

From an advisory perspective, examining the German Fiscal Code (AO) system is insightful. With the classification of e-sports under the promotion of sport (Section 52 para. 2 sentence 1 no. 21 AO), Section 67a AO ("sporting events as a special-purpose enterprise") should, in principle, apply accordingly. This includes the well-known €45,000 limit for gross income from sporting events and the voting rights for "paid sport." Detailed questions regarding specific application will be clarified by the legislator (explanatory memorandum/AEAO) and administrative practice, but the general guidelines are now established.

Previous Legal Situation: Why the Change to E-Sports' Charitable Status Was Overdue

The starting point for this change was the traditional understanding of "sport" in non-profit law. It was typically defined as physical and motorized, drawing on Federal Fiscal Court (BFH) case law. Exceptions, such as chess, were explicitly mentioned in the AO.

E-sports did not fall within this traditional framework. Existing recognitions were often patchwork solutions, achieved through other charitable purposes (e.g., youth welfare, education) or state-specific administrative leeway. This created significant uncertainty for years, impacting statutes, fund usage, events, sponsoring, and separate accounting.

This problem has been consistently highlighted on this blog for years. As early as 2018, we pointed out that a clear justification of non-profit status in an association's articles of association is mandatory, and mere buzzword purposes are insufficient. In 2019, we emphasized that sport recognition itself is less important than functioning funding channels and non-profit status in accordance with the German Fiscal Code (AO). An explicit proposal was made then to consider e-sports on an equal footing in Section 52 AO.

In 2020, we again highlighted legal form issues and the limited suitability of the "association" for commercial goals for team start-ups. All these discussions underscore why a nationwide clarification of tax law is now the correct and necessary step.

The government draft adopts this perspective by explicitly anchoring e-sports in the catalog of Section 52 AO. It is not treated as an exotic special case, but rather within the context of sport. From a legal standpoint, this approach is clean: instead of dogmatic debates about the concept of sport, the legislator is creating clarity in tax law where it is most needed in practice, covering non-profit status, special-purpose operations, spheres, and lump sums. This is precisely why this change is necessary and overdue.

Practical experience from our own mandates with e-sports games, clubs, and marketers has shown that previous uncertainty regularly led to inconsistent administrative practices. It also resulted in risky drafting of articles of association and aborted funding or sponsorship projects because tax risks, such as a permanent shift to commercial business operations, were unacceptable. Recognition as a charitable purpose, coupled with the simultaneous increase in limits and lump sums, will significantly simplify planning.

Practical Implications: Corporation Tax, Business Tax, Special-Purpose Operations, Sponsoring, and Personnel

Non-Profit Status and Corporation Tax

The recognition of the "promotion of e-sports" as a charitable purpose under Section 52 para. 2 sentence 1 no. 21 AO opens up familiar tax privileges. These include Section 5 para. 1 no. 9 KStG (corporate income tax exemption) and trade tax exemption for corporations that operate in accordance with their articles of association and comply with formal requirements (Section 59 et seq. AO, especially Section 60 AO sample articles of association, Section 63 AO obligations to provide evidence).

Non-profit status does not grant a VAT exemption, but it structures income spheres and forms the basis for special-purpose enterprises. This is precisely where the simplifications proposed in the draft will be beneficial.

Commercial Business Operations and New €50,000 Exemption Limit

Previously, even relatively small commercial activities could create difficulties for maintaining non-profit status, especially if separate accounting, fund usage, and statutory purposes were not properly structured. The exemption limit of €50,000 for taxable commercial operations (Section 64 (3) sentence 1 AO) now acts as a buffer.

Profits below this amount are not subject to corporation and trade tax. Profits exceeding this amount are taxable, but the non-profit status itself remains unaffected, provided the commercial operations do not become disproportionately large. The fact that, up to €50,000, there is no longer any need to allocate spheres (Section 64 (3) sentence 2 AO) further reduces administrative bureaucracy.

Prompt Use of Funds: €100,000 Limit

Income in e-sports, particularly from events, technology, licenses, and youth work, often fluctuates considerably. Raising the limit for the obligation to use funds in a timely manner to €100,000 (Section 55 (1) no. 5 sentence 4 AO) reduces pressure on organizations.

Funds can now be used more strategically, for instance, for medium-term development of training and support structures, without jeopardizing non-profit status due to formal "timeliness" requirements.

Trainer and Volunteer Allowance

The increase to €3,300 or €960 from 2026 (Section 3 No. 26, 26a EStG) provides legally secure leeway for coaches, administrators, supervisors, and youth leaders. In e-sports practice, this allows qualified personnel to be structured and remunerated more easily and with greater legal certainty, without immediately falling into the zone of regular employment relationships. This also helps in addressing potential liability risks for esports teams when working with players.

Special-Purpose Business "Sporting Events" (Section 67a AO)

If e-sports are classified as a sport under Section 52 para. 2 sentence 1 no. 21 AO, there is strong justification for including e-sports events (tournaments, leagues) under Section 67a AO in the future. This would bring all the associated consequences:

• Special-purpose business up to €45,000 gross income p.a. within a standardized framework.
• Electoral rights for the participation of "paid athletes".
• Simplified differentiation from taxable business operations.

For marketers and organizers, this means that event concepts and contracts (entry fees, prize money, sponsorship areas, media rights, hospitality) should be designed to consistently reflect the special-purpose operating characteristics. Clear rules are essential for who ultimately holds the rights to the game and associated media. If the €45,000 limit is exceeded, the tax classification of the entire event year should be checked at an early stage.

Sponsoring, Advertising, IP Rights

Non-profit status does not prevent sponsorship and advertising revenue from being taxable. The decisive factor remains the clear separation of the non-material sector, special-purpose operations, and commercial business operations. Sponsorship agreements must specify service descriptions, such as logo placements, naming rights, and social media posts, in a way that makes tax consequences and VAT obligations calculable.

In e-sports practice, publisher licenses (tournament/broadcast rights) and trademark rights must also be clearly structured. This is important not only under civil law but also to avoid diluting the separation of spheres for tax purposes.

Our work for clients has demonstrated that once the tax law framework, including recognition as a sporting purpose, Section 67a special-purpose enterprise, and new exemption limits, is clear, sponsorship and marketing structures can be rationalized. This leads to better results for clubs, teams, and marketers. This law firm has been representing e-sports publishers/games, clubs, and marketers for years and views the new regulation as a practical breakthrough.

Articles of Association, Compliance, Youth Protection: What Matters Now

Statutory Purpose and AEAO Conformity

The articles of association must clearly define the charitable purpose. In the future, the "promotion of e-sports" should be explicitly included with reference to Section 52 para. 2 sentence 1 no. 21 AO. Sub-purposes are also suitable, such as youth promotion, education, or health prevention, each with specific activities.

Older posts on this blog have already pointed out that mere empty formulas (e.g., "promotes e-sports") are insufficient. Verifiable purposes, descriptions of activities, and altruism clauses are required. This also applies to broader T&Cs, regulation, and compliance in the digital space.

Addiction Prevention and "Healthy Behavior" as a Practical Task

The overview of the Tax Amendment Act emphasizes that e-sports bodies should also focus on addiction prevention and teach a healthy approach to the medium. This is more than a mere program statement; it is a mandate for action to be reflected in statutes, activity reports, and fund usage. This includes prevention and education offers, protection concepts, coaching guidelines, and age limits in training and competition. It is advisable to anchor these elements in the statutes and regulations, making them verifiable. Furthermore, robust protection of minors in online games should be a core component, alongside general data protection in esports.

Separate Accounting, Documentation, Governance

Even with the new exemption limits, separate accounting and documentation remain central. For each area—non-material, special-purpose operation (Section 67a AO), commercial business operation—cost and revenue streams must be mapped. Sponsorship packages, ticketing, merchandising, streaming rights, and prize money need to be clearly allocated.

In the case of prize money payments and expense allowances, BFH and administrative principles must be observed. In case of doubt, lump-sum payments without documented reference to expenses jeopardize the special-purpose operation.

Differentiation from Sports Promotion and Association Law

It is important to reiterate that tax recognition as a non-profit sporting purpose does not automatically open the door to sports funding programs and association structures. Funding law and association admissions follow their own distinct criteria. "Homework" is still needed here regarding structure, ethics/integrity rules, arbitration, game regulations, and youth protection.

In many areas, e-sports already aligns more closely with media/event law than traditional sport, and this continues to be the case.

Non-Profit Status: Reflecting on Earlier Debates and What to Do Now

Review: What This Blog Has Advocated for Years

• Quality of articles of association beats labels: As early as 2018, it was emphasized here that the justification for non-profit status and the specific design of the articles of association are decisive, not merely labels.
• Sport recognition alone is of secondary importance as long as tax law becomes practicable: In 2019, drawing parallels with Denmark, it was proposed to focus on funding opportunities and AO charitable status. This is precisely what the current draft now addresses.
• Legal form and commerce: In 2020, it was explained why the association is not suitable for purely commercial objectives, while it remains ideal for popular sport and youth activities. The new legal situation facilitates precisely this area of popular sport. Professional and commercial structures still typically belong within corporate or personal company law vehicles.

The fact that the legislator is now following suit in tax law is therefore legally logical. The old BFH definition of sport (emphasizing physicality) did not adequately encompass e-sports, and transitional solutions (e.g., youth welfare/education) remained fragile. A legal clarification in Section 52 AO provides the most legally secure route. For general guidance, it’s always beneficial to review common legal mistakes made by start-ups.

Action List for the Coming Weeks

Here are key steps for organizations to take:

• Adapt statutes & regulations
  • Explicitly include "promotion of e-sports" under Section 52 para. 2 sentence 1 no. 21 AO. Specify fields of activity (training, competitions, youth promotion, health/prevention, media skills).
  • Establish a prevention/youth protection concept (training times, age limits, supervision, screen time rules, addiction prevention).
• Separate spheres, plan budgets
  • Map event calendar 2026 onwards to Section 67a AO (considering the €45,000 limit, voting rights for paid sport, and documentation requirements).
  • Incorporate the €50,000 exemption limit and €100,000 time limit into financial planning. Structure sponsorship pipelines and merchandising to maintain special-purpose operations as much as possible.
• Contracts & rights
  • Adapt sponsorship contracts (service profiles, VAT, consideration). Properly license publisher/IP rights for tournaments and streams.
  • Ensure that prize money and expense regulations are firmly documented (receipts, accounts) to avoid jeopardizing Section 67a status.
• Personnel & remuneration
  • Integrate trainer/volunteer allowances into HR guidelines (for coaches, admins, youth leaders).
  • Adapt sample contracts for fees and ancillary activities.
• Communication & promotion
  • Clarify with public funding bodies that the change is tax-related. If necessary, prepare separate procedures/applications for recognition under sports law.

What Applies During the Transition Phase

As long as the law has not yet been passed and entered into force, the status quo remains. For newly founded organizations and amendments to articles of association, a "two-stage" solution is recommended:

1. Formulate the articles of association now so that they will be automatically compliant once the law comes into force (e.g., wording: "Promotion of sport, in particular e-sports…").
2. Continue to cover existing lines of recognition (e.g., youth welfare/education/media competence) until promulgation. This avoids creating a "void" in the interim.

From a legal perspective, there is no objection to drafting articles of association with foresight and preparing the initial audit at the tax office with reference to the draft. Commentaries and overviews of the government draft support this practice.

Conclusion

The government draft of the Tax Amendment Act 2025 brings decisive clarity for the e-sports sector. E-sports will be recognized for tax purposes as a charitable purpose in the sense of promoting sport (Section 52 para. 2 sentence 1 no. 21 AO). This recognition, combined with increased exemption limits, reduced bureaucracy in the allocation of spheres, relaxed fund usage rules, and higher lump sums, creates a viable framework. E-sports clubs, organizers, and marketers can now build solid structures without constantly facing the risk of disqualification.

For e-sports games, clubs, and marketers, who are regularly represented by this firm, this is the "great order" that has long been called for: a fiscally clean and administratively manageable environment with clear rules for events, sponsorship, and youth development.

The fact that other areas of law, such as sports promotion law and association admissions, do not automatically follow is not a flaw. Instead, it reflects sound regulatory policy, where tax law establishes framework conditions that professional and association rights then independently define. This approach is essential for the sustainable anchoring of e-sports, emphasizing quality statutes, compliance, youth protection, and professional contract work.

Now is the opportune time to align statutes, regulations, contracts, and financial planning for 2026 and beyond, thereby utilizing these new opportunities in a legally secure manner.