Tax Breaks, Trade-Offs, and the Future: Germany’s Law Granting Esports Non-Profit Status

The German Bundestag (the Parliament) has officially voted in favour of awarding esports non-profit status, a long-awaited move with the first proposals dating back to 2018.¹ The decision grants esports advantages similar to traditional sports, potentially circumventing the long-running German legal debate over whether esports should be categorized as “traditional sports” . The German Games Industry Association and the German Esports Federation were primary proponents of this decision, seeking to “make Germany the best esports location. In view of the high social, cultural and economic relevance of esports, the framework conditions must be designed in the best possible way”.²  

The reason for the long wait was due to harsh criticism faced by the first proposals for being “too restrictive and hindering efforts of the esports and traditional sports industries to find common ground regarding the upcoming Olympic Esports Games set to take place in 2027”.³ Nevertheless, the proposition has not been finalized, as it will now move to the Bundesrat (Federal Council) for a final examination. However, given the significant political backing of the motion, the Bundesrat is expected to pass the examination.⁴

Many esports scholars and professionals are very pleased with the Bundestag’s decision. For example, Nepomuk Nothelfer, Co-founder of the world’s first Research Center for Esports Law and the Esports Research Network, celebrated the decision as a “a real milestone for many organizations in Esport and Sport” and for being “really historic!”.⁵ 

The status change will be cemented within the Tax Amendment Law 2025 (Steueränderungsgesetz 2025) and is set to take effect from 2026.⁶

The esports community in general is also viewing this move very favorably, as Chris Flato, president of the German E-Sports Federation (E-Sport Bund Deutschland), summarised the glaring benefits of the new status: “With the planned non-profit status from 2026, German e-sports is taking a historic step: our clubs will finally receive the same recognition and legal certainty as traditional sports clubs. This means more support for youth work, stable club structures, and real opportunities for sustainable youth development. The tax amendment law shows that e-sports has arrived – as a contemporary sports and youth movement with a clear future”.⁷

Be that as it may, the new non-profit status also includes important potentially negative implications for the esports industry in Germany, and potentially worldwide. This article will explore some of the crucial benefits complimenting the decision, particularly tax exemptions, increase in public funding, and societal development, but will also shed light on some potentially negative implications of this landmark motion, specifically regarding stricter governance and compliance obligations.

Tax Exemptions 

Arguably the most impactful positive implication of the new status of Esports is the numerous tax privileges that will be granted to local esports clubs. In virtue of being classified as a non-profit activity, esports organisations gain access to the same fiscal benefits reserved for amateur sports organisations. 

Among these benefits are tax-free compensation for volunteer trainers and coaches, easier access to government grants, and reduced 7% VAT (instead of the current 19%) or complete exemptions on memberships, event tickets, and any related services.⁸ These benefits are crucial for grassroots clubs, often operating on thin margins.⁹ By giving clubs the option and funds to invest more of their resources in better facilities, hardware, and coaching, the ground is being set for a significant expansion of the German esports scene fostering more competition and attracting new actors to the market. 

Crucially, under the new law, both the trainer allowance and volunteer allowance are increased. The trainer allowance is set to raise from EUR 3,000 to EUR 3,300, and the volunteer allowance from EUR 840 to EUR 960.¹⁰ These increases in allowance will provide aspiring and established coaches and staff a potentially stable job, allowing them to dedicate their time fully to their role and their goal of developing and training young players.

Thus, by recognising esports as a non-profit activity, the new Tax Code will provide much needed financial support for an industry that has been struggling with profitability and financial stability.¹¹

Public Funding and Social Development

The new non-profit status also enables other key benefits beyond tax exemptions, including greater access to public funding and an emphasis on social development.  

Often, federal states and government grants in Germany are strictly reserved for non-profit organisations.¹² The decision to include Esports in the non-profit category means that public capital, in particular government grants will be much easier to access.¹³ Hence, the new status allows esports organisations available grants that were previously inaccessible, providing resources for training and development initiatives that can be helpful and impactful for the esports industry as well as the community. 

Moreover, the new law adjusts the ‘immediacy requirement’ for funds granted to non-profit organisations. The requirement mandates that a non-profit organisation must generally use its funds for its statutory purposes within a certain timeframe. The Tax Amendment Law 2025 increased the threshold requirement for what annual total income is exempt from this requirement from EUR 45,000 to EUR 100,000.¹⁴ This is significant for the esports organisations, as they now have more time to make use of a larger pool of funds without regulatory pressure.

The government grants are predominantly intended to help the common good, consistent with the long-standing call for esports to aid in, inter alia, the development of young people. The idea is that “esports can help young people build teamwork, improve strategic thinking, and learn discipline through structured competition”.¹⁵ 

Given that the German government has also called for esports organisations to protect young people, for example by helping stop excessive gaming, encouraging sensible screen times, and assisting their mental health,¹⁶ the public funding offered to esports in virtue of its status as non-profit will surely help achieve this goal. Initiatives are already being taken, for example, the Esports Player Foundation, the first non-profit esports talent development organisation, announced on December 4th that they have offered over 900 individual sessions with sports psychologists for young children and players.¹⁷

The Downsides: Strict Governance and Compliance

While the benefits discussed are significant for the esports industry, there are some important caveats that present complex challenges for organisations by virtue of the non-profit categorisation. Particularly, all the benefits discussed are conditional upon an organisation’s adherence to German tax law, which imposes significant administrative and legal burdens.

Organisations that fall under ‘non-profit’ must pursue their aims selflessly, exclusively, and directly, and are generally not allowed to accumulate income.¹⁸

A further important requirement for non-profit organisations is the Rule of Altruistic Activity, stipulated in section 55(1) of the German Fiscal Code, which states that an organisation must not primarily serve the economic purposes of its members, but instead, funds must be used only for statutory purposes, with employees and third parties prohibited from receiving unreasonably high remuneration.¹⁹ This requirement could place constraints on esports organisations who will thus have to now justify the use of their funds to show they are not primarily serving economic purposes. 

A further requirement is for an organisation’s statute to clearly define its charitable objectives, and it must pursue those objectives exclusively, otherwise risking losing its tax benefits.²⁰ Therefore, if the organisation must pursue their aims selflessly and for a charitable purpose, it is presumed that the esports organisation’s statute would reflect that, and any attempt at pursuing highly profitable commercial ventures could contravene section 56. 

Non-compliance of the requirements set for non-profit organisations could risk a revocation of the organisation’s non-profit status by the Tax Authority, which could result in very harmful consequences like retroactive taxation, a financial consequence that has frequently led to the insolvency of the non-profit organisation.²¹

Takeaways: The Future of Esports Law

The Bundestag’s decision to formally recognise esports as a non-profit represents a significant moment for esports, both on Germany’s domestic level, and internationally.

The new status acknowledges that esports clubs and organisations operate in the public interest, and that the esports industry itself has benefits, such as improved social interaction.²² This will, and has already, given the industry a reputational boost, especially amongst parents, as a new report in Germany suggests that 51 percent of guardians of minors under 18 can imagine registering their children with an e-sports association, provided that the focus is on teaching the correct use of digital media, and 58 percent expect an increase in Germany’s attractiveness as an esports location.²³

Moreover, the financial assistance, government grants, and tax benefits afforded to esports organisations could have a significant effect on the grassroots esports scene, as amateur organisations will have more resources to provide better training, use better hardware, and keep talented coaches and trainers. This will directly impact the future of esports as the talent pool and popularity of the industry may grow exponentially. 

The Bundestag’s decision and its positive implications could also have world-wide effects. Given Germany is the largest esports market in Europe,²⁴ the reputation of its framework may encourage other nations struggling with ‘fragile and manipulable’ regulations, such as Italy and Spain,²⁵ to adopt the German template for securing their grassroots esports ecosystem. 

Even with the stricter governance and compliance requirements posed on esports organisations due to the non-profit status, the author views this development in Germany as a crucial win for the esports industry, both domestically and worldwide.

1.  Hannah Marie ZT, ‘Esports Non-Profit status approved by German Parliament’ (4 December 2025) https://esports-news.co.uk/2025/12/04/esports-non-profit-status-approved-by-german-parliament/ accessed 9 December 2025.
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2.  Dom Sacco, ”We want Germany to become the leading destination in esports’ – German Games Industry Association calls for tax code changes’ (19 June 2025) https://esports-news.co.uk/2023/08/15/german-games-industry-association-esports/ accessed 9 December 2025.
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3.  Jonno Nicholson, ‘German government to recognise esports as non-profit activity’ (11 September 2025) https://esportsinsider.com/2025/09/german-government-esports-non-profit accessed 10 December 2025.
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4.  Hannah Marie ZT, (n 1).
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5.  Nepomuk Nothelfer, ‘Post on German Parliament’s Approval of Esports Non-Profit Status’ (1 December 2025) LinkedIn https://www.linkedin.com/posts/activity-7401258182699876353-ufdF accessed 11 December 2025.
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6.  Pascal Wagner, ‘Bundestag Approves Non-Profit Status for Esports, game and ESBD Celebrate’ (4 December 2025) https://www.gamesmarket.global/bundestag-approves-non-profit-status-for-esports-game-and-esbd-celebrate/ accessed 10 December 2025.
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7. ibid. ↩︎
8.  Tarun Sayal, ‘German parliament approves non-profit status for esports’ (5 December 2025) https://esportsradar.gg/german-parliament-approves-non-profit-status-for-esports/ accessed 9 December 2025.
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9.  Hannah Marie ZT, (n 1).
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10.  Katrin Driesch and Marina Leker, ‘Tax Amendment Act 2025’ (5 December 2025) BDO Tax & Legal https://www.bdo.de/en-gb/insights/updates/tax-legal/tax-amendment-act-2025 accessed 9 December 2025.
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11.  Wasif Ahmed, ‘How do esports organisations make money?’ (18 June 2025) https://esportsinsider.com/2024/03/how-do-esports-organisations-make-money accessed 10 December 2025.
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12.  Lisa Benjes, ‘Guide to Public Project Funding in Germany’ (13 April 2023) field notes Berlin https://field-notes.berlin/en/colleg/media/guide-public-project-funding-germany accessed 10 December 2025.
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13.  Hannah Marie ZT, (n 1).
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14.  PwC Tax & Legal, ‘German Parliament passes the Tax Amendment Act 2025’ (6 December 2025) https://blogs.pwc.de/en/german-tax-and-legal-news/article/252235/german-parliament-passes-the-tax-amendment-act-2025/ accessed 9 December 2025.
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15.  Sudhanshu Ranjan, ‘Esports gains ground in Germany with new legal status’ (12 September 2025) https://sigma.world/news/germany-recognises-esports-as-non-profit-activity/ accessed 9 December 2025.
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16.  ibid.
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17.  Hannah Marie ZT, (n 1).
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18.  Dr Andreas Richter and Dr Katharina Gollan, ‘Q&A – Charitable organisations in Germany’ (11 February 2019) PE-Magazin https://www.pe-magazin.com/qa-charitable-organisations-in-germany/ accessed 10 December 2025.
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19.  ibid.
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20.  ibid.
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21.  Winheller Law Firm, ‘Withdrawal of Charitable Status in Germany’ (2025) https://www.winheller.com/en/nonprofit-organizations/withdrawal-of-charitable-status.html accessed 10 December 2025.
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22.  Hannah Marie ZT, (n 1).
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23.  Heise Online, ‘Bundestag Resolution: E-sports to be recognized as non-profit’ (4 December 2025) https://www.heise.de/en/news/Bundestag-Resolution-E-sports-to-be-recognized-as-non-profit-11103384.html accessed 9 December 2025.
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24.  Victor Frascarelli, ‘Report reveals strong German esports market, but key challenges remain’ (August 2025) https://esportsradar.gg/report-seveals-strong-german-esports-market-but-key-challenges-remain/ accessed 10 December 2025.
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25.  Charis Georgiades, ‘The Regulatory Landscape of eSports’ (30 June 2021) Money Smart Athlete Blog https://moneysmartathlete.com/esports/the-regulatory-landscape-of-esports/ accessed 10 December 2025.
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