You recently had a surprising windfall while playing at your favorite online casino and are wondering whether your gambling winnings are taxable? Well, the answer to this question largely depends on where you live.
The legislative frameworks of some jurisdictions treat gambling winnings as taxable income, levying separate taxes on recreational and professional gamblers.
In other countries, gamblers are fully exempt from any levies and licensed gambling businesses are the only ones to shoulder the burden of taxes. Furthermore, tax rates vary wildly from one jurisdiction to another when in place, which further adds to the confusion.
- Where are gambling winnings tax-free?
- Which countries levy taxes on players’ profits?
- What are the tax rates in different jurisdictions?
Let’s kick things off by answering the first question.
Countries Where Online Gamblers Go Tax-Free
Many countries do not impose taxes on sports bettors, casino goers, and lottery fans largely because they treat gambling as a form of entertainment rather than a professional activity.
Furthermore, recreational players cannot rely on gambling as a source of income since the odds are skewed against them so that they inevitably suffer losses in the long term.
There is no need to worry about paying taxes on your casino winnings if you reside in a tax-free jurisdiction like those listed below. Instead, the taxes are passed onto licensed gambling operators and as you shall see, the rates vary from one market to the next.
1The United Kingdom
Casino, lottery, and sports wagering winnings are presently not taxable in the UK but this was not always the case.
The profits of British punters were subject to a 9% tax but, thankfully, the levy was abolished by now-former Prime Minister Gordon Brown in 2001.
Remote gambling businesses are taxed instead but gaming duty percentages vary based on the specific betting product on offer.
Online sportsbooks are subject to general betting duties (GBD), a levy that does not apply to on-track wagering activities.
The taxes are based on the online casino operators’ gross gaming revenue (GGR), which is the overall amount of stakes received minus the profits paid back to winning customers.
- A 3% GBD for spread betting on financial instruments
- A 15% GBD for tote and fixed-odds sports betting
- A 10% GBD for other forms of spread wagering
- A 15% GBD for commissions collected by UK-licensed sports betting exchanges
- 21% of the GGR of remote casino operators. This is an increase of six percentage points from the previous 15% rate. The new tax rates came into effect in April 2019.
The gambling industry in the Great White North is regulated at a federal and provincial level. The precise regulatory frameworks vary across different provinces and so do the tax rates for licensed gambling operators at a provincial level.
Licensees are additionally subject to a 28% federal tax on their revenue. Casual players are fully exempt from paying taxes. Professional gamblers are taxed when gambling is their main source of income.
Both professional and recreational gamblers Down Under are exempt from paying taxes on their winnings. We cannot say the same about licensed remote gambling businesses, whose revenue is taxed on a point-of-consumption basis. The levies for remote betting companies are again state-specific.
- 15% for operators licensed in Queensland, South Australia, the Australian Capital Territory, Tasmania, and Western Australia
- 8% for companies licensed in Victoria
- 10% for remote betting businesses accepting wagers from New South Wales residents
The tax rates above are only applicable to online sportsbooks licensed in Oz. Remote casino gambling remains illegal for the time being under the provisions of the Interactive Gambling Act of 2001, along with the following services:
- Remote in-play sports wagering
- Wagering on the results of lottery draws
- Providing remote sports wagering without holding a valid Aussie license
Swedes have been enjoying access to legal online gambling since 2002 but the entire sector was initially subject to the monopoly of the state-owned Svenska Spel.
The Nordic country opened the local market to foreign competition at the beginning of 2019 when a new gambling act came into effect.
Foreign operators looking to penetrate the local market must obtain licenses from the Swedish Gaming Authority (Spelinspektionen). Licensees incur the following fees and taxes.
- A SEK400,000 (US$39,666) fee for a remote gambling license
- A SEK400,000 (US$39,666) fee for a remote sports betting license
- A SEK700,000 (US$69,416) fee for combined licenses (sports betting and casino gambling)
- A SEK300,000 (US$29,750) fee for renewing any of the above-listed licenses
- 18% tax rates levied on the gross gambling revenue of remote commercial gambling operators
Winning recreational gamblers are exempt from taxation in most cases. Horse racing wagers are the only exception as they are subject to a 6% tax deducted from the profits as a value-added tax (VAT).
Sports betting is the only legal form of remote gambling here, and the country is yet to move forward with the legalization of online casino games, bingo, and poker.
The taxes on remote sportsbooks are province-specific. For example, the KwaZulu-Natal province taxes licensed fixed-odds betting operators at a rate of 6%.
Taxes are not imposed on the profits of sports bettors and casino gamblers residing in the Boot. However, iGaming businesses authorized to operate in Italy are subject to some of the highest taxes in the whole of Europe. You can see the rates below.
- 25% of the GGR of online casino and bingo operators
- 24% of the GGR of online fixed-odds sports betting operators
- 20% of the GGR of landbased sportsbooks
- 22% of the GGR generated from wagers on virtual sports
Denmark is one of the highest-taxed countries in Europe, but gamblers themselves get to enjoy tax-free winnings. The provision of all legal forms of gambling is subject to the following levies under the Danish Gambling Duties Act.
- 28% of the GGR for online casinos
- 28% of the GGR of fixed-odds betting operators and online betting exchanges
- 45% of the GGR for brick-and-mortar casinos in addition to 30% for GGR that surpasses DKK4.3 million (US$602,592)
- 41% of the GGR from gambling machines and arcades located outside casinos, for example, in restaurants and bars
- 8% of the GGR from horse racing bets on local racetracks
The above taxes are deducted on a monthly basis. In addition to these rates, authorized gambling businesses must pay licensing fees annually.
Belgian gamblers should not worry about committing accidental tax evasion as local legislation does not impose any levies on winnings from lotteries and other chance-based games.
The tax rates enforced on gambling operators licensed by the Belgium Gaming Commission (Kansselcommissie) vary across the three regions of the country. Games of chance are taxed at 11% in Walloon, while the rates jump to 15% in the Brussels and Flanders regions.
The percentages are deducted from the gambling operators’ turnover, which is the total amount of wagers they have collected within a given period.
Certain forms of gambling like betting on pigeon races and state-operated lotteries are exempt from taxation. The same goes for chance-based games organized for non-profit purposes.
Taxes on Gambling Winnings in the US
The US witnessed an unprecedented gambling expansion over the past several years. Many states have already passed legislation to legalize and regulate online gambling in one form or another. Sports wagering is now legal in around 30 states, 18 of which allow it in both retail and online format via licensed websites and mobile apps.
Remote casino gaming appears to be significantly less popular among US legislators as very few states have passed laws to regulate these activities. Interactive games of chance are currently legal in Connecticut, New Jersey, Michigan, Nevada, and Pennsylvania.
Non-Resident Gamblers Also Pay Taxes
Another peculiarity of the US tax system is that it enforces taxes on gamblers who lack US citizenship. Foreign nationals are divided into two groups – resident and non-resident aliens.
Other Countries That Levy Taxes on Gambling Winnings
The US is hardly the only country to impose hefty taxes on gambling winnings. Its southern neighbor, Mexico, also enforces taxation on gamblers’ profits and so do several other countries on the other side of the pond.
The tax rates are significantly lower than those in the United States, at least in most cases.
France taxes casino winnings at a rate of 12% provided that they go over the €1,500 threshold. Gambling operators deduct the corresponding amounts on the spot. Gamblers who engage professionally in skill-based games like poker must report their earnings as non-commercial profits.
In Spain, gamblers must declare their gains but have the option to deduct their losses similarly to US players, up to the amount of their winnings. A 20% withholding tax applies to lottery winnings over €40,000, including lotteries organized by non-profit entities like the National Organization of Blind People and the Spanish Red Cross.
Norway taxes ‘accidental’ gambling winnings over NOK10,000 (US$1,006) at a rate of 27%. Exceptions are made for prizes won from lotteries organized by the state-owned Norsk Rikstoto and Norsk Tipping.
In Mexico, both license holders and gamblers with permanent residency must pay income taxes on their earnings. Winning gamblers are subject to both federal (1%) and state taxes (from 4% to 6%). Licensed operators must withhold the taxes on the spot and pay them on behalf of gamblers. The federal rate applies to non-resident gamblers as well.
5The Czech Republic
The Czech Republic has adopted the GGR tax model whereby the levies apply to the difference between the overall amounts wagered and the winnings paid out to successful gamblers. Lottery operators are subject to the highest tax rates.
- 35% of the GGR of lotteries
- 23% of the GGR of all other gambling games conducted in landbased and interactive casinos
- 19% corporate income tax
Czech players are also subject to taxation in certain cases under the provisions of the Income Tax Act № 586/1992 Coll. Residents who win more than Kč1 million (US$42,531) from raffles or lotteries must pay a 15% personal income tax.
The same tax rate applies annually to profits from other types of gambling but only on condition the difference between the overall winnings and the wagers made is greater than Kč1 million.