How are Gambling Winnings Taxed?
A guide to How are Gambling Winnings Taxed?.
Most of the time, players are required to report their winnings so they can pay income tax. However, there are times when online and offline casino winnings are tax-free, which is the case in the EU.
About UK Gambling Winnings
The primary point about UK gambling taxes is that all winnings are tax-free thanks to Gordon Brown in 2001.
At one time, bookies were the ones that were taxed, but this was passed to the punters. Today, punters are not taxed and the bookmakers pay 15 percent POI tax.
This situation will probably not change anytime soon. The UK tax system is structured in such a way that online casino taxes are not worthwhile. The reason is that if there were a tax levied against gambling profits, there would also need to be an allowance made for losses.
Since losses tend to exceed winnings, the UK has no gambling tax. Even professional gamblers are not required to pay tax on their winnings. Even if a person makes a living from gambling in the UK, it is not considered a trade.
Gambling Taxes Around the World
How are gambling winnings taxed around the rest of the world?
It depends on where you reside. Australia, Austria, Belgium, Bulgaria, Canada, Denmark, Finland, Germany, Italy, and Sweden are among many countries that do not tax gambling winnings. Their policies are much like that of the UK except Spain where a person must declare their winnings with their income for income tax purposes.
However, offline and online casino taxes are applied in the following countries at the respective percentages:
- France – 7.5 percent on sports, 2 percent on poker, and 7.5 percent on horse racing Nigeria – 20 percent
- Greece – 10 percent on lottery only
- Ireland – Bookmakers do not pay tax on winnings, but they are required to pay 1 percent on all bets
- Kenya – 7.5 percent tax imposed on bookmakers only
- Macau – 40 percent
- Netherlands – 29 percent on lottery winnings over €454
- Portugal – 35 percent on lottery only
- Slovenia – Lottery only at 50 percent when winnings exceed €4,000
- South Africa – 6 percent on horse racing only
This shows how different countries view gambling winnings. Sometimes, a country may have no gambling taxation laws because gambling is illegal. Even if there is a taxation law, online gambling may be illegal, which is the case in the United States.
Filing Taxes on Gambling Winnings
The tax filing method is going to depend on the country, with different forms used. In some instances, an online casino will provide a document that shows winnings, which can be used when filing taxes. If taxes are reported, it is a good idea to find out how the casino reports to the taxation authority.
If they do not report taxes, it becomes your sole responsibility to account for and file your winnings. Just because a casino does not report to the taxation authority in your country does not mean that you can avoid filing. An audit could result in your winnings being discovered.
Overall, it is best to keep track of everything, winnings and losses, in the way of good documentation. Some countries allow you to claim your losses and not just your winnings, which can lower your tax obligation. You can do a little research to find out exactly how taxes associated with online gambling will impact you.