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Tax liability for "Play to Earn" games


From the first game console in 1972 to millions of games on the smartphone, a lot has changed in the digital gaming world. The Newzoo Global Games Market Report counts around 3.2 billion online gamers worldwide in 2022. Game developers are taking advantage of this market and are constantly developing new game concepts by combining new areas. By linking the fields of games, NFT and the decentralized financial economy (DeFi), it should finally be possible for every player to earn money while playing games (so-called “play-to-earn games”). Whether or not the fun extra income constitutes work for one gamer or another is irrelevant to the tax authorities. Anyone who does not declare their income on their tax return, or does not declare it correctly, could face criminal and civil consequences. In this article, you will learn how Play to Earn Games work and how to evaluate such games for tax purposes.

What are Play to Earn Games?

Play to Earn Game is a blockchain-based game concept where players are rewarded for contributions to the ecosystem through virtual units of value (called tokens) and have the ability to purchase parts of the virtual world. The contributions in the ecosystem are the computing power in the network, with the tokens being a documentation of their computing power (tokenization). For this purpose, NFT are used as a unit of value (so called. NFT games; you can learn what NFTs are here). They store transactions, assets and ownership in a decentralized manner. That is, these virtual value units are neither controlled by a state central bank or public body, nor do they have the legal status of a currency. They can be exchanged for recognized value units within the networks or in the real world.

What are the costs of Play to Earn Games?

Users of “Play to Earn Games” may be required to purchase certain services in order to participate or advance in the game. Furthermore, the user can purchase plots, items or a custom representation of his graphic character (so-called skins). The virtual items or properties acquired in the game can be destroyed and cannot be replaced. Transaction fees of between 2.5% and 10% of the purchase price are incurred on resale. These fees, investment costs and loss accounts can play an important role in tax returns and should therefore be documented and stored securely.

How should the acquired NFTs be valued for tax purposes?

NFTs are arguably valued as art objects for tax purposes and are included in other assets. Depending on how an NFT was obtained, there is a different tax valuation. They are entered on the income tax return in Annexes SO to other income under current income or as private capital gains. Exceptions apply to commercial activities.

Do I have to pay tax on income from Play to Earn Games?

You are required to file an income tax return for income from self-employment if the income exceeds the exemption limits. How to assess income and expenses in Play to Earn Games cannot be clearly determined due to technological developments and the rigid German tax system. A generally valid tax assessment of all “Play to Earn Games” is therefore not possible and requires a separate examination by a specialist lawyer or tax consultant.

Do you still have questions regarding the taxation of cryptocurrencies? I am happy to provide companies with detailed advice on these topics. As an IT lawyer and business consultant, I am well versed in the fields of cryptotechnology and online gaming. Give me a call or schedule a free consultation to get to know me.

Marian Härtel

Marian Härtel

Marian Härtel is a lawyer and entrepreneur specializing in copyright law, competition law and IT/IP law, with a focus on games, esports, media and blockchain.


03322 5078053