It is important for gamblers to understand that they have to comply with the legislation regarding taxes and gambling in their country. Tax laws differ from one country to another, which is why you must take to understand the gambling laws in your country. Many people who gamble online often think that their withdrawals go unnoticed, but that’s not true.
To set the record straight, you must always ensure that you comply with the online gambling tax rules that have been put in place by your country. One thing that often confuses people who gamble online is whether they have to pay taxes on their winnings, considering that online gambling generates a lot of money in tax revenues every year.
All casual gamblers must know that their winnings are fully taxable and they have to be reported in tax return. Income generated through gambling includes winning from casinos, lotteries, horse racing, and even cash winnings. You can check this with the relevant gambling bodies in your country.
Taxation of Gambling Winnings Income In Europe
Taxation of gambling winnings income in Europe changed in 2012 when the Finance Minister said in his budget speech that starting 4/1/2012, all gamblers must declare winnings that exceed R25, 000. The Finance Minister also said that the law would apply to winnings made through the National Lotteries, which would be subjected to a further final withholding tax of 15%.
However, the minister did not say how the taxes would be collected, the periods that will count for the calculations, and if losses will be deducted to offset winnings. European Association for the Study of Gambling highlights the situation regarding the taxation gambling winnings, and it includes information for all the countries in Europe.
A report from the finding included a more than complicate case. One of the main factors that were clear from the report was that there are different rules in the various countries in Europe and the taxation rules for the different forms of gambling are different.
For instance, the rules for winning derived from casinos are different from winnings derived from lotteries and sports betting. There are also significant differences within countries.
One thing that emerged from the report is that in most countries in Europe, it is the supplier that has to pay the tax. Also, the tax is actually not tax on winnings but rather tax on profits and revenues. Although there are cases where players are required to pay the tax, it is not purely winning tax but income tax as winnings that are considered income.
The different approaches that the nations have towards gambling have also contributed to other taxation issues. These problems revolved around levying VAT and gambling and/or betting taxes on online gambling.
There was an article in the EU VAT Directive that foresees a particular exemption in online gambling. This exemption was lotteries, betting and other gambling forms that are subject to the limitations and conditions put in place by individual countries. Certain games are not included in this definition. This includes pinball machines and other online games that are subject to Value Added Tax, which is then payable by providers in Europe in their countries of establishment.
In addition to VAT, there is gambling and betting tax that applies to most countries in Europe. For example, Netherland has legislation of taxation. They also tax people who win prizes on online games.
Internal Revenue Service (IRS)
Certain rules have been put in place by the IRS for casual gamblers. Some of these rules include gambling winnings that become taxable fully and have to be reported on the tax return of the player. They’ve noted that income generated through gambling includes but it is not limited to winnings derived from raffles, lotteries, betting on horse racing and online casinos.
This includes cash winnings as well, and fair market value of prizes such as trips and motor cars. If a player receives his gambling winnings or if they have winnings derived from gambling that are subject to income tax withholding, they will be required to provide a certain form about certain gambling winnings.
Players are required to report winnings as “other income.” Additionally, they may have to pay an estimated tax on winnings they derive on gambling. According to the IRS, players can only deduct gambling losses if they itemize deductions. But the amount in losses they can deduct must not exceed the amount of gambling income posted on the return.
You should always keep an accurate record of your gambling losses and winnings. To deduct losses from tax return, you will have to provide statements, tickets, receives and other documents that clearly document the amounts of your losses and winnings. For income purposes, players who are not residents of the US will have to check with the IRS for clarification on how they will declare their winnings.