Chess Grandmaster Francisco Vallejo Pons Haunted by Online Poker Tax Dispute
Francisco Vallejo Pons is not well known as a poker player, though many top chess players do find a crossover career in the card game. A chess Grandmaster at the age of 16, the Spaniard recently left the European Individual Championship in Batumi, Georgia after the fifth round, citing a two-year debacle with the Spanish tax authority as the key cause, according to Chess.com.
Vallejo was seeded fourth in the European Individual, a tournament that he co-championed in 2013. The important chess event is also a qualifier for the 2019 FIDE World Cup. Last week, Vallejo shared a lengthy Facebook post outlining his personal troubles now keeping him from playing chess, which he starts by explaining, “How an idyllic life can turn into a disaster at great speed.”
"If you had the bad luck to play in 2011, your life can be destroyed."
"We go back to the year 2011. I play some online poker, for fun, I'm not a gambler by any means. I lost everything, a few thousand and I stopped playing. Then I stopped.
"In 2016 I received a letter from the [Spanish tax authority] requesting more than six figures! More than half a million euros because I played poker and I lost. It seems a macabre joke, but it is not, from that moment begins a snowball that crushes you."
Problematic Spanish Tax Law
The way Vallejo explains it, his story is one of bad timing. The Spaniard dabbled a bit in online poker in 2011 as many strategy game players do, only to net a loss and give it up. Unfortunate for Vallejo, an old Spanish law which was changed in 2012 dictated that all online gambling winnings be subject to a 47 percent tax, while losses cannot be deducted.
While Vallejo had over €1 million in online poker “winnings,” he lost a bit more than that to net a small loss overall. Ignoring the loss column, the Spanish tax authority demanded in 2016 Vallejo pay the more than €500,000 that represents 47 percent of the winnings column – money that Vallejo did not actually win and did not cash out.
All forms of gambling for any significant period of time produce a combination of wins and losses, and most tax systems reflect this reality, only taxing net winnings. While this is the case in Spain now and ever since 2012, Vallejo’s brief stint playing online fell just before 2012 and he has become a victim of the old law as a result.
"They are perfectly aware, but they have never wanted to consider the losses. They have already seized most of my savings."
Vallejo told David Llada in an article in El Mundo, that he never got too much into poker or considered himself a poker player, and chess was always his main focus.
"I would say that I was not even a big fan. I read some books at the time, but I do not fit at all in the profile of a ‘player.’ I thought I could win, and when I realized it was not like that, I left it. It is a very repetitive game and, unlike chess, you really do not enjoy playing a lot."
Vallejo also told Llada he assumed it was a mistake when he was contacted in 2016 by a tax authority as he never even withdrew money from an online account to his bank account, because he did not actually net a profit and ended up losing the few thousand he initially invested in it.
Regarding the fact that he actually posted an overall loss in poker, Vallejo said of the tax department, "They are perfectly aware, but they have never wanted to consider the losses. They have already seized most of my savings."
Vallejo explained in his Thursday Facebook post that the snowball effect of debilitating circumstances has ultimately led to his inability to focus on participating in long chess tournaments at the moment.
"It was a mistake to come to the European Championship, I was not prepared for that."
"As of 2016, lawyers begin, meetings begin with the [Spanish tax authority], I start canceling tournaments, skin infections begin due to nerves, I have to cancel my participation with the national team because I honestly cannot stand the pressure, in more than one game I practically have tears in the eyes.
To finish off all this, it coincides with my mother [losing money due to an investment loss by Santander bank] and with a very serious health infection abroad that nearly ends her life, and which I could not support because the [Spanish tax authority] has already taken everything I had and still claims more...
I thought I could with everything, I thought that bad luck would end one day, that I would continue to fight as if nothing had happened, and I have tried every day, for almost two years. It was a mistake to come to the European Championship, I was not prepared for that, although I would have loved it, the reality is stubborn, but anyway, this 'only' is chess."
Though Llada points out that Vallejo is the only Spaniard being victimized by thee obsolete Spanish law, many are still in trial and some have found a way to reach an agreement to only pay taxes on their net profits.
Vallejo discussed the aftermath a bit more in a subsequent Facebook post on Friday, pointing out that he is not the only victim of the exploitative law. “Many people who in their day played poker or sports betting for a hobby, and lost small numbers, are now involved in terrible judicial processes, with their accounts seized and their lives destroyed.
“This FLAGRANT injustice was corrected, and 'improved' in 2012, where the previous law is 'clarified', and as of that date, 'losses' and 'profits' can be compensated for actually paying for what one has earned. If you had the bad luck to play in 2011, your life can be destroyed. In an incomprehensible way, they did not apply retroactivity in the new law."
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