Israeli poker star Rafi Amit made 20 million shekels ($5.2 million) playing poker around the world over the years. Now, the Israel Tax Authority has taken him to court, demanding he pay income tax on his poker earnings.
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In an unusual twist, the Tax Authority argued that Amit was an Israeli resident for the years under question, despite the fact that he spent only a few days in Israel during that time. The Tax Authority also insisted that the earnings should be categorized as income and not gambling earnings, and should thus be charged at a 50% marginal tax rate.
The Tel Aviv District Court ruled in the Tax Authority’s favor on most counts, and Amit was ultimately ordered to pay 320,000 shekels. The Tax Authority had initially demanded 2.5 million shekels.
Amit, 37, started gambling in high school. By age 23, he was spending long periods of time abroad, playing poker at casinos, online and in organized tournaments. His parents live in Holon. Over the years, he sent them a total of $5 million.
The conflict with the Israel Tax Authority related only to 2007, since the statute of limitations ran out for previous years, as well as for 2008. The tax clerk claimed that he was an Israeli resident in 2007 even though he didn’t meet the minimum number of days in the country, and argued that his poker revenues should be considered a business or income, which is liable to a marginal tax rate of 50%.
His poker revenues for 2007 were 4.2 million shekels, and the Tax Authority asked to add a 10% fine since Amit did not maintain accounting books. It demanded 2.5 million shekels in taxes.
Amit contested the bill, arguing that he hadn’t been an Israeli resident since before 2002, and that since poker is a game of luck, it should be subject to a tax of no more than 25%, the rate for gambling revenue.
Individuals are considered Israeli residents for income tax purposes if the center of their life is in Israel — in terms of number of days in the country or connection to Israel.
In order to meet the minimum residency requirement, an individual must be in the country for 183 days or more in a given year, or alternately for a total of 425 days over the course of three years, including 30 days in the most recent year. Amit did not meet this requirement as he was in Israel for only 290 days between 2005 and 2007.
As for his connection to Israel, Amit had a bank account in Las Vegas as well as a bank account and credit card in Israel. He had real estate investments in Israel, an apartment in Toronto he had purchased in 2007 and a gym membership in Las Vegas.
Judge Harry Kirsch ruled that Amit should be considered an Israeli resident, despite his “subjective feeling that he’d left Israel and ceased being a resident,” as he wrote. Noting that the case was not clear-cut, Kirsch justified his ruling by citing Amit’s extended visits to Israel, the fact that he didn’t have a definite place of residence abroad and regular transfers of his poker winnings to Israel. Kirsch noted that Amit could have just as easily kept his earnings in the United States, a country with a stable financial system.
After ruling that Amit was an Israeli resident, Kirsch addressed his tax bill. The Tax Authority had initially argued that Amit had unreported income totaling 4.2 million shekels, but Amit successfully argued that most of that was from years other than 2007 and that he only earned 1.4 million shekels in 2007.
On that sum, the Tax Authority wanted to charge him a marginal tax rate of 50% — the highest tax bracket for income tax — and not the 25% gambling tax rate. The judge sided with the Tax Authority, agreeing that Amit was a professional poker player and should be charged at the income tax rate.
However, since Amit had already paid some $68,000 to American tax authorities, this would be offset from his Israeli tax bill. Ultimately the judge ruled he was due to pay 320,000 shekels.
In terms of court costs, the judge argued that the case had not been clear-cut and charged Amit a relatively moderate 12,500 shekels.