Felix Stephensen might still be celebrating his second place finish at the World Series of Poker (WSOP) Main Event this month, but it’s likely that his home nation of Norway is celebrating just as much.
Part of that is due to pride in their native son, for sure, but there’s also another reason for Norwegians to celebrate: about half of the money Stephensen earned will now go directly into the nation’s coffers.
The Norde won $5,147,911 for his runner-up finish to Martin Jacobson, but will face a heavy tax burden to his home nation as a result. According to Norwegian lawyers, it’s simply a matter of how tax laws work in Norway.
“Poker prizes are specifically mentioned in the ABC of tax regulations,” said business lawyer Trond Erik Andersen. “It says that individual prizes of more than 1,000 kroner ($150) are eligible for tax, but there are possibilities to deduct expenses, like starting fees, that relate directly to poker tournaments.”
Normally, Norwegians would face a 27 percent tax rate on such winnings. However, Stephensen will face a heavier burden because of his standing as a professional poker player, which means he is self-employed and will have to pay his own social security contributions.
“For a professional poker player there will be surtax plus the self-employed person’s social security contribution, in addition to the 27 percent,” Andersen said. “His income will be taxed at 50.4 percent. Like all self-employed people, he will get deductions for expenses related to poker playing.”
That means that Stephensen could ultimately end up paying nearly $2.6 million in taxes, though that number will likely come down somewhat when deductions and other exemptions are considered. That may come as a bitter pill to swallow, especially since Stephensen no longer even lives in Norway.
For the last two-and-a-half years, Stephensen has called London his home. However, he will still owe tax in his native Norway, though that might not have been the case had his final table run come in 2015. Under Norwegian law, individuals must pay income taxes even when they live abroad for at least three years, though after that they may be exempt if they meet certain criteria.
Taxation on gambling winnings is handled in a variety of ways, depending on the nation in question. In some places, such as the United Kingdom, all gambling winnings are tax-free. In others, such as Canada, poker winnings are normally not taxable, but could potentially be taxed if they are considered business earnings for a professional poker player.
And in still other countries, ranging from many European nations to the United States, winnings from poker and other forms of gambling are taxed at various rates, sometimes changing based on the professional status of a player. In some cases, players have faced even harsher taxation from their governments after large wins.
Take the example of Peter Eastgate, the Danish player who won $9.1 million for first place in the 2008 World Series of Poker Main Event. He was forced to pay a 45 percent tax rate on his first $4 million, as well as a marginal 75 percent rate on all additional winnings. That likely earned him a tax bill of over $5.6 million back in Denmark.