Which Countries Pay Tax on Gambling Winnings?

In the United Kingdom, anyone winning when gambling does not have to pay tax on that money directly, instead a point of consumption tax applies at the point of sale that is paid by the operator.

This applies to both the online and offline gambling worlds. Everything you may win, be it big or small, is tax-free when paid out. That came about as of January 1, 2022. Gordon Brown, the Chancellor of the Exchequer at the time, abolished betting tax laws.

Before this time, the government collected a duty of 6.75% from bookmakers. That was then passed on to bettors as a 9% tax. Yet with the tax abolished, it marked the first time since 1968 that punters were not taxed. That has remained the case in the UK ever since. Today, only the bookies, casinos and so on, pay tax on their revenue.

That is not the case in all countries around the world, though. Some locations have laws that determine the winners need to pay tax on their income from betting and the amount of this tax differs from place to place.  That’s what we’re going to look at here.

What worldwide locations charge taxes on betting payouts? Where does the money taken as tax go to in these countries?

The United States

The United States has a difficult relationship with gambling. Different states regulate it in different ways. Some of them provide both online and offline gambling. Others provide one or the other. There are also those states that do not provide gambling of any variety to citizens.

Today, there are more states providing legal gambling than ever before. More than half of them have some form of betting and/or gambling in operation within. Yet they all have the common outcome of taxing winners on their payouts.

Taxes are usually required on gambling income over a certain amount. Individuals have to report their winnings from gambling to the Internal Revenue Service (IRS). This takes place via Form W-2G for Certain Gambling Winnings.

Regardless of how big or small your payouts from gambling are, it needs reporting but depending on the amount, you may also receive the noted form. This reports the amount of your winnings and the amount of tax withheld, if any. Anyone who is a non-resident of the USA uses Form 1040-NR, Nonresident Alien Income Tax Return.

If you win enough to receive Form W-2G, then this is usually sent out by January 31 of the following year. A flat rate of 24% will be withheld by the issuer of the form in most cases. Generally, a resident of the USA will need to pay tax in the following instances:

• If you win over $1,200 from bingo or slot machines
• If you win over £1,500 from keno
• If you win over $5,000 from poker
• If you win over $600 or at least 300x the amount of a wager placed
• On any amount of winnings subject to federal income tax withholding

Even if that form is not sent out to you, then you need to report the income on your tax return. While the standard rate of 24% tax is the norm, certain circumstances have different outcomes. Gambling winnings over $5,000 will be subject to income tax withholding:

• Any sweepstakes, lottery or wagering pool
• Any other wager if the proceeds are equal to or greater than 300x the wager amount

State taxes also differ for gambling winnings. Some states incorporate a flat rate for gambling, while others are more complicated. Nine states do not impose income tax on residents. They are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.

The table below explains the income tax rate on a state-by-state basis:

It is key to note that not all U.S. states noted here offer legal gambling. The percentages noted relate to any income gained within those states.

In November 2021, a man from Hilliard, Ohio lied on his tax return about his gambling winnings. Mustafa Shalash won $1,000,000 in 2015 on a single lottery ticket, according to court documents. He received a payout of $710,000, with $290,000 withheld in taxes.

On his tax return for 2015 though, Shalash reported gambling winnings of $1,069,100. He also made a false claim of losing $1,069,100 when gambling. His actual losses were no more than $300,000, though.

As a way of trying to conceal his funds, he wired $690,000 abroad. This included $440,000 to a bank account under his name in Jordan. He plead guilty to tax fraud in the end. Failing a false income return carries penalties of up to 3 years in prison.

Germany, France, Romania and Ukraine

The basic legal framework in Germany is the Interstate Treaty 2021. This came into effect in July of 2021. Uniform taxes in Germany stand at 5.3% on player stakes. This applies to virtual slot games, online poker and sports betting activity. That included tax factors out of the tax base.

The effective tax rate on the whole payment to a player is 5.03%. Yet many have criticised that tax imposition. Industry bodies say that it makes operating the games a challenge. Further to this, they claim that it contravenes the aim of the Interstate Treaty.

France has a different approach altogether. Players’ winnings have a tax of 13.7% withheld. This applies to any income from gambling over €1,500. Gamblers do not have to pay this in an outright way. Instead, the licensed domestic gambling companies have to pay it but they deduct it from all players’ winnings.

There is nothing else charged after this tax, though. The rule applies to any French person partaking in local gambling. Anyone gaining income from offshore gambling sites has to pay that tax themselves.

In Romania, income from gambling is also taxed. If the income exceeds RON 66,750 (£11,870), but is less than RON 445,000 (£79,120), the tax comes into effect. A fixed amount of RON 667.50 (£120) + 16% on the amount above RON 66,750 is payable and if it is beyond RON 445,000, then payable is a fixed amount of RON 61,187.50 (£10,880) + 25% on top.

For gambling income from online gambling, the income tax is withheld at source. Whenever a player requests a withdrawal, this is when the tax comes off the amount. Any income from gambling at casinos, poker clubs and so on up to RON 66,750 is non-taxable income.

In February of 2021, the Ukrainian Committee on Finance, Tax and Customs approved a tax bill. This set a flat rate of 10% tax on all forms of gambling in the country. Yet this applies to GGR, paid by the operators of gambling. Winnings in Ukraine are only taxed if they equate to more than eight months’ minimum wage.

That sits at around UAH 48,000 (£1,160). Any winnings exceeding that amount suffer under the country’s income tax laws. The standard rate for this in Ukraine is 18%.

Brazil

The laws in Brazil relating to gambling winnings are unique in their own right. As per Article 676 of Decree Law No. 3,000, prizes for lottery and horse racing winnings are not tax-exempt.

An exclusive withholding income tax rate of 30% of the prize is set in place.

If you look at poker winnings though, the taxation rate is different. The Brazilian Revenue Service has an alternate description for such winnings.

If a prize depends on the performance of participants, it is payment of the work put in.

The income tax withholding rates in Brazil for poker are as follows:

The table above applies to other winnings, too.

This includes funds obtained at offshore websites as well as at land-based venues.

India

In India, despite gambling being illegal in certain states, the Central Income Tax Act controls taxation.

It is vital for players to keep their withdrawal receipts.

This serves as proof of what a player has won from gambling.

Indian tax legislation requires all income above ₹10,000 (£110) from gambling to be reported and that takes place via the annual tax form for citizens.

The official law relates to winnings from:

• Lotteries
• Crossword puzzles
• Races including horse races
• Card games
• Any other games of any sort or gambling or betting of any form

There is an express inclusion of legal and illegal gaming within the legislation. Anything above that ₹10,000 level will have a 30% tax rate applied to it.

It is also key to note that certain surcharges also exist. Most notable of these is the Health and Education Cess, and this adds 4% on top of the levy. That tax comes about regardless of a person’s income brackets, too. With this in effect, the tax rate sits at about 31.2% altogether. Proceeds from this levy go towards funding national priority projects. Prime focuses for such include the healthcare and education sectors.

In the case of someone winning over ₹5,000,000 (£54,000) or ₹10,000,000 (£110,000), other rules come into play. Surcharges of 10% or 15%, respectively, are operational. Earnings of such vast amounts in India are usually won from lotteries. Large jackpots from casino gameplay are often withdrawn over several separate transactions.

That information relates to the laws in general across India. Each state, such as in the USA, can and have introduced their own laws for taxation. A varied levy system is thus in place across the country. This does not affect the winnings of players, though. Instead, the levies from state-to-state only apply to operators of gambling in India. The union level taxes on income for players are the only laws that matter.