A large number of countries around the world hold lotteries for residents to play. These are often set up to raise money for good causes and charities. That is the case with the UK National Lottery, which has raised tens of billions for good causes so far. At the same time, large jackpots exist for anyone lucky enough to match all numbers in the draw.
Those staggering sums of money are often a reason that many people play lotteries. Several big jackpot payouts have occurred in the United Kingdom over the years. One of the latest came about in 2022, when a EuroMillions victor received £195 million, a record at the time and in the UK, players are not taxed on their winnings, all prize money received earned is tax-free.
This means that there was nothing deducted from that £195 million payout. The same is not true about lottery winnings in other countries, though. Various countries do apply tax to players’ winnings and the tax rate differs from location to location. Furthermore, it will apply to different levels of winnings in some places.
While in the UK, a winner’s bank account will receive the money whole and intact, it’s not the same elsewhere. That’s because tax on such in the UK comes out at the point of consumption and this is not something that many countries around the world have in effect. If you play lotteries in other countries, either whilst there or via third-party sites, it is worth being aware what taxes might apply if you do win.
The UK Has Tax-Free Winnings
While many things in the UK are not perfect, there are certain things that remain appealing and one of the features that stands out for gamblers is the way it treats gambling winnings. Most people winning something wouldn’t even realise a tax has been paid and this is because betting duties that used to apply directly to the punter are no longer in effect.
The lottery itself has always paid winnings without tax since it started in 1994. The fact that a large proportion of the ticket money goes to good causes winnings were awarded tax free. The same was not true for general gambling at the time, sports bets, for example, were taxed on the stake or the winnings until the turn of the millennium.
Former chancellor Gordon Brown removed the rules that applied tax directly to bets and winnings for all forms of gambling in 2001. Instead, all taxes from gambling come from the operators themselves in the form of a point of consumption tax. Different levels of taxes have come and gone throughout the years but it remains the case that players do not pay anything directly.
Things would become a bit more confusing for you if you wanted to give a gift from that money. Or if you started gaining interest on it. Different taxes then come into effect, which benefits nobody except the government. Yet any initial payout that you stand to win is what you will receive if you’re successful at gambling or the lottery.
The United States of America
In comparison to the United Kingdom, the USA is right at the other end of the scale. Of course, America operates as 50 separate states for many things. While there is a single rule that governs over all states, all 50 separate entities also have their own rules. As a result of this, both state and federal taxes affect lottery wins in the U.S.
That’s not to diminish the sums of money that U.S. lotteries offer because these still sit up at the top of the charts, providing millions of dollars to winners and that remains the case even after tax. One of the big differences with American lotteries is how winners receive their payouts. They can opt to receive the money in a lump sum or in annuity. The latter option sees them paid smaller amounts from the total over a set timeframe. This could be 20 years or 30 years, for example.
Back in 2016, a $1.586 billion Powerball lottery jackpot was up for grabs. In the end, three people in three different states came forward as winners. The sum was, of course, split between them. Those winners were able to select one of two payment options for this. They were:
- Receive a lump sum of around $327.8 million each
- Get $533 million each before tax paid over years
Once U.S. lottery winners receive their payouts, they must pay federal tax and on top of that, there may be state tax incurred as well. Anything that comes under the definition of a “substantial amount of money” suffers taxation. This usually refers to anything over $1,000, depending upon how a person obtained that money. The Inland Revenue Service (IRS) takes the federal tax of 24% from the winnings. That tax comes off your winnings straight away. The recipient of the winnings also gets a Form W-G2 as proof of the payment.
What About the Rest of the World?
The United Kingdom and USA are very different when it comes to taxes. But they aren’t the only countries in the world. Around 195 countries exist around the globe. It would, of course, be quite time-consuming to explain the taxation rules of all locations but it is key to mention that gambling is not a legal activity in all countries. Thus, no tax would be due on gambling winnings as a result. In those circumstances, gambling should not have happened in the first place.
It is also the case that some countries have the same bans on gambling – but they allow lotteries. You only need to look to countries like Cambodia or Singapore to see this. These state lotteries are operational thanks to the governments of their respective countries. That does confuse matters when it comes to gambling and potential taxes. Yet, we can take a look at some of the countries around the world which are well-known and, of course, the ones that have lotteries and taxes in place for winnings.
Portugal
If you are a resident of Portugal and you win any type of lottery, you will incur taxes. The law in Portugal says that any win of more than €5,000 will have the imposition of a 20% tax rate. Games like the EuroMillions and Lotaria Clássica operate in Portugal with the potential for big wins.
A story from 2015 reinforces a little bit about how this tax affects players in Portugal. Four people won the EuroMillions in February of that year. Their initial thought was that they had matched six of the seven winning numbers. Yet that wasn’t quite the case. Instead, they had matched four of the five regular numbers and both the star numbers. Thus, they did not receive the large jackpot payout that they expected. Instead, their payout equated to €5,223. The missing number in the sequence was worth an estimated €14.995 million.
They came so close but ended up feeling like they were so far away from a big win. But their experience with the lottery winnings weren’t over yet. Instead, the tax of 20% came off their EuroMillions win, so, rather than receive €5,223, the four were the recipients of €4,178. The bigger insult came about when they realised something else. If their win had been under €5,000, they wouldn’t have had to pay the tax. The €223 over that threshold meant that the tax came into force.
Many people in Portugal have questioned the legality of the tax, too. The country ended up in European Courts in 2009 for its taxation of winnings. This surrounded the payouts to taxpayers in other EU member states. It was due to this that the government chose to tax its own citizens on winnings as well. That put an end to the EU debate over the discriminatory nature of the tax.
Spain
Just across the border and into Spain, lottery taxes are also in place. This stands at the same amount as in Portugal – 20%. Before 2013, all prizes from lotteries in Spain were exempt from taxation at all. An exempt amount for personal income stands at €40,000. That law has been in place since January 1, 2020. Tax is then levied independently on each of the prizes won. Taxpayers in Spain who have won prizes must file a declaration for the special tax. They need to fill out Form 136 to do this.
The tax rate and rules surrounding such has changed in Spain a few times in recent years. The amount exempt from taxation was €2,500 in prizes from games before July 5, 2018. From that date onwards, the exemption stood at €10,000. Then it changed to €20,000 in 2019. It was only from the beginning of 2020 that the exemption went up again to the current €40,000.
Switzerland
It could be worse, though. You could be a resident of Switzerland. There, the Gaming Act came into effect in January of 2019. Through this, the taxation of gaming winnings was also regulated for the first time. The taxation rules surround all forms of gambling in Switzerland and this includes lotteries, which come under the definition of “Large Games”. Lotteries like Swiss Lotto and the EuroMillions are definitely part of this category. It also includes sports betting and slot machine gameplay.
Taxes on winnings from any of those Large Games will only apply to payouts of more than CHF 1 million. This equates to around £900,000. Of the winnings beyond that amount, 5% of the excess amount can be deducted as stake and this can reach up to CHF 5,000 per win. It comes out as a lump sum deduction too, irrespective of the actual stake paid. The separate Swiss cantons may also set different amounts, if they wish. In these circumstances, taxes can only apply if the win exceeds CHF 1 million.
Italy
Taxation in Italy also applies to lottery winnings. This comes into effect on any payout above €500. Anything below this is tax-free. At present, the Italian government imposes a 20% tax on winnings above that figure.
If you won €1,000 on an Italian lottery, €500 of it would be taxable. That is the amount above the threshold. Thus, €100 comes off in tax, meaning that the player would receive €900 in winnings afterwards.
This tax rate came into effect in Italy in March 2020. Before this, the rate had gone through an increase from 6% to 12% in 2017. At the same time, the withholding rate of Lotto rose from 6% to 8%. Lottery operator Sisal withholds the tax from a player’s winnings. This means that it is not necessary to pay it at a later time. Players get a certificate stating that the tax has already come off their winnings, too.
A Look at the Remaining Countries
| Country | Tax Rate on Lottery Wins |
|---|---|
| United States of America | 24% flat rate + any state taxes |
| Portugal | 20% on wins above €5,000 |
| Spain | 20% on wins above €40,000 |
| Switzerland | 5% on wins above CHF 1,000,000 |
| Italy | 20% on wins above €500 |
| The Netherlands | 29% on wins above €454 |
| Slovenia | 15% on wins above €300 |
| Croatia | 15% on wins between 10,000 and 30,000 kn 20% on wins above 30,000 kn |
| Brazil | 30% on wins above the value of the first tier of the individual income tax monthly rate |
| Latvia | 23% on wins between €3,000 and €55,000 31.4% on wins above €55,000 |
| India | 31.2% on wins above Rs 10,000 |
| Pakistan | 15% withholding tax for filers 20% withholding tax for non-filers |
| Poland | 10% on wins above 2,280 zlotys |
| Ukraine | 10% on wins above UAH48,000 |
| Turkey | 20% on wins above 7,060 lira |
Several other countries impose taxes on lottery winnings and so we thought we would highlight some of these in a table.
Keep in mind that if you visit one of the countries and buy a lottery ticket, you also pay the tax. Foreign visitors are not exempt from such tax but may be able to claim some or all of the tax back if the country has a tax treaty with the UK, or the country you are resident in.