Shares in FTSE 250 betting group Betfair have taken a dive after the company revealed its plans to withdraw its exchange product from the German market.
The decision was made after tax authorities failed to agree to an interpretation of the new law in Germany that applies a 5% tax on stakes on sports betting in the country.
The company told investors that it believes that because it is not an organiser of sports betting, its bets placed on its exchange do not come under the law, which was introduced in July of this year.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The firm has made clear that a tax at this rate would make Betfair's current exchange model "unviable".
In the 2012 full year, about 4% of core Betfair revenue came from Germany and this delivered a contribution of around £6m before the allocation of central costs. The firm is planning to review its operations in the country and said the on-going contribution from Germany will be minimal.
The company had taken legal advice and consulted with the relevant tax authorities to seek clarification on interpretation of the law and its applicability to exchanges.
However, to date the tax authorities have not been able to agree to an interpretation of the law that would allow Betfair to continue to offer the exchange product, the firm said.
"The company believes that it has fulfilled all of its obligations under German law, including the filing of necessary tax returns. Discussions are continuing with tax authorities regarding the potential tax liability, if any, arising from bets placed on its exchange since the law came into effect," it added.
-
Bitcoin hits new heights - is now a good time to invest?The value of Bitcoin has surged to a 20-month high. Why is Bitcoin rising and is now a good time to invest?
-
Gold hits record high - could it soar higher next year?
The yellow metal has hit a new all-time high. We look at market expectations for 2024, whether investors should sell and take profits, and how to invest in gold.
