The Highs and Lows: Gambling Winnings Tax

• Online Gambling Taxes Usa
• Online Gambling Losses Taxes

Canadians can play the lottery, live casinos, poker and online games without paying taxes unless they are a professional. Likewise, Australians and New Zealanders can also gamble tax-free. To put things in perspective, Americans do pay some of the lowest personal income taxes in the first world. Things tend to even out in the end.

There is a huge disparity in the quantity of tax collected across legal gambling jurisdictions. In some countries, punters can expect to lose up to 10% of their winnings to the taxman, whereas in other countries this can be between 1-3%. The method of collection varies greatly too, in some countries gambling taxes are collected with stealth and being not directly levied on the winnings, but propagated throughout the platform through various financial engineering methods. Adjusting payout rates is an efficient method for operators in the UK to collect taxes and avoid charging the winnings of customers. The end result is always the same no matter which method is applied, taxes are unavoidable. All we can do as a player at casinos, online gambling platforms, or sportsbooks is to continue to monitor the global markets, picking countries to play that offer the most favorable set of taxation laws for gambling customers.

Top Countries for Low Gambling Taxes

There is a huge financial incentive for countries to maintain a low rate of taxation on gambling, the warmest and welcoming countries to new casinos enjoy huge shares of the profits through indirect means. Gamblers also gain financially. With the gambling winnings tax rate at the countries with the lowest taxes on casino winnings offering players the best deals, international gamblers will intentionally target these locations for huge portions of their play. Of course, the differences are sometimes not so large, and the material differences are only truly felt once you begin betting large sums of money. Below we’ll go into more details on the top countries for low gambling taxes.

Russia

1. This is necessary to avoid clashes with the IRS because online gambling income is part of your total income. In other words, your (job income + gambling income + other incomes = total income). The non-cash winnings are to be reported as other income, and they are taxed using their Fair Market Value.
2. Online gambling taxes do have a few gray areas. Many of the current gambling venues are striving to offer online sportsbooks, so this type of gambling and how taxes apply is important. What the IRS does is specify what is taxable and what is non-taxable income.

Of all the countries around the world with low taxes levied against gambling, Russia is the most welcoming of all. The Russian government collects 0% on Gross Gaming Revenue (GGR) from operators. Instead, the operators simply have to pay a monthly fee based on the number of gaming terminals, tables, and machines they have within the premises. This method results in a much lower taxation liability for the gambling operators and casinos in Russia, and this favorable set of circumstances is passed down to the customers in the form of much higher payout rates and better returns across the entire suite of gambling products.

However, the laws in Russia are constantly changing and there has been a bill introduced in late 2018 that has the potential to rock the gambling industry in Russia. A new flat tax will be applied to customers making wins over $200, and there has even been talked of doubling the monthly fee rate applied to casinos depending on their gaming capacity. All of these changes are being delicately considered by the government, and consideration is being made towards their effect on foreign investment. In Russia’s far east, ambitious plans for Vladivostok gambling are already in motion to build an enormous casino hub on the scale of Las Vegas, all of which are dependent on foreign investors who are price-sensitive to Russia’s gambling tax laws.

Italy

Italy has a long and fabled history with gambling, and their culture of wagering goes all the way back to the pre-historic times at the birth of the Roman Empire. Citizens of the great Roman dynasty would often play games with dice and other gambling instruments. The oldest casino in the world opened in Venice in 1638, and since then the country has been a welcoming home of gamblers. Since then the industry has rapidly expanded to include a whole range of different gaming options, from traditional land-based casino venues to online gaming operators and sportsbooks. Italy now has some of the most liberal laws towards gambling in the world.

The Italian betting tax is one of the lowest levied across the legal gambling world. Most casinos pay 0% on Gross Gaming Revenue, and in a similar situation to Russia, they pay only on the capacity of their casino offerings. Customers who play at these locations enjoy the financial benefits too, and there is very few places in the world where players can get higher value for money on their winnings and book value payout rates than in Italy.

United States

The United States has a complicated relationship with gambling, primarily due to its legal code and system whereby states are able to draw up their own laws and taxes. The Federal Government has legalized many forms of gambling throughout the United States, and they set a low baseline tax rate of around 3%. Besides this, states where gambling is legal levy their own taxes, these can vary from between 2-5% in most jurisdictions. Accounting for both the Federal and State taxes, players can enjoy a relatively low tax on their winnings of around 5% in some parts of the country.

Whilst these rates do seem particularly low, there is a huge variation across some of the states so be careful if you’re planning a trip. For the lowest gambling taxes in the United States, you’ll want to head to either Nevada, New Jersey or South Dakota. Good news for Las Vegas enthusiasts as the Sin City is subject to a relatively low tax rate compared to the rest of the country. Gambling in the United States comes with a whole host of additional amnesties and luxury extras that you won’t find elsewhere around the world, and overall it can be considered one of the best countries in the world to gamble.

Online Gambling Taxes Usa

Countries with High Gambling Taxes

Whilst there are several places a thrifty gambler would enjoy due to lowered levied tax on winnings, equally countries with high gambling taxes are worth being aware of and avoiding at all costs. The following three countries have been picked out for their especially high Gross Gaming Revenue (GGR) tax rates, meaning your net profits will be seriously affected whenever playing in these jurisdictions.

Germany

German gambling has been fully legalized for a long time and citizens can enjoy a whole host of gaming options both in-person and online. The country is packed full of casinos, poker rooms, and bookmakers, with large budgets allocated to marketing and the development of new gaming technologies across the country. For all these reasons many people in Germany gamble, but unfortunately, the tax code is harsh towards the industry in Germany, and customers here are usually getting prices far below the average market rate.

Gross Gaming Revenue (GGR) taxes can be as high as 90% on some casino operators. But in reality, it is much lower. Even so, the high GGR rate ensures that casino profits are shaved down to a very fine margin. All of this additional liability is passed on to the customers who have to pay a percentage of their winnings in taxes. At most online sports betting sites in Germany, the bet slips will display the gross winnings, to calculate the net you can usually discount at least 5% from this total amount on each bet.

United Kingdom

Perhaps the country with the most intimate relationship with gambling in the world, the British have a highly liberal and celebrated approach towards the gambling industry. Even the great Winston Churchill loved gambling, and would often go deep into the night playing cards and plotting his war strategies with his top generals. Whilst the market is becoming over-saturated with new operators, the government continues to collect enormous taxes from them.

Gambling operators based in the United Kingdom can pay up to 50% on Gross Gaming Revenue, but in reality, this is much lower. Home to some of the largest and richest gambling operators in the world, the British punters have an excellent range of choices when it comes to online casinos and sports betting. This huge plethora of online gaming options usually allow for top value to be found.

Macau

Asia has several gambling hotspots, but none amongst them are as popular as the high-roller hotbed in Macau. The coastal city that operators with economic freedom is the only legal place to gamble in China. The Chinese government was only willing to make this concession if the rewards would be plentiful, and indeed the gambling industry in Macau generates huge tax income for the Chinese state.

The highly lucrative business has a tax liability of up to 39% on Gross Gaming Revenue. With massive revenues flowing through their accounts, Macau is one of the richest and most capital intensive gambling industries throughout the world. Most punters are willing to make this trade-off between lower returns and a luxury trip to the glitz and glamour of Macau.

Go High or Go Low?

The question of whether to go high or low is difficult for most countries to contend with when designing their tax code. In order to attract foreign investment and drive growth it is better to start with lower taxes, and once a well-grounded gaming industry has been established, gradually increase the tax rate levied. This approach is being utilized across the world and is seeing governments enjoy huge revenues collected directly from the pockets of gamblers.

Frequently Asked Questions

What percentage is gambling winning tax?

This depends massively on where you live. If you are playing at online casinos in the UK, there is no gambling winning tax. But in the USA, the gambling winning tax can be above 20% in some states.

Do I need to declare all gambling winnings?

Just as with what amount gambling winning tax may be, whether or not you need to declare your winnings massively depends on where you live. If you play at real money sites in a country where you need to pay taxes on your winnings, then you need to declare them. Basically, if you need to pay taxes, you need to declare and pay.

All countries and governments have their own online gambling tax policies and legislation so we need to look at this question from a global perspective. Firstly we’ll cover the situation in the UK and following that look at how things may differ in the rest of the world.

Do you have to pay tax on your gambling winnings?

UK Gambling Taxes

Key Points

• All winnings either online or offline are tax free!
• Any betting tax abolished in 2001 by Gordon Brown.
• Tax used to be on bookies but they passed to punters.
• Bookmakers must now pay 15% POI tax but not punters.
• POI tax on any games of chance increased from 15% to 21% but again not for punters.

In the UK any and all winnings from gambling – either online or at betting shops – are entirely tax free and do not need to be declared as part of any tax return.

This has been the case since the then Chancellor of the Exchequer Gordon Brown’s budget of 2001, when he abolished Betting Duty which had stood at 6.75%. That duty was removed in an attempt to persuade bookmakers not to move their operations overseas and therefore take jobs and revenue away from the UK economy.

All of that is not to say that there is no tax involved when it comes to gambling in the UK, however, and there is a ‘point of consumption’ tax related to the activity. This does not affect punters themselves, though, and will be dealt with separately further down this page.

Will the situation ever change? Generally speaking there is little chance that this situation will be reversed, either, as the UK tax system is simply not built in such a way that taxing gambling winnings would be viable. This is the case as it is fairly standard within the system that if tax is levied on the income or profit made through an activity, then there must also be an allowance made against losses through the same activity.

With gambling being an activity where overall more losses are made by punters than winnings, therefore, such a change in the tax legislation would cost the UK government revenue. As a result, it is quite simply not something which would be considered. Your betting, casino, slot machine, poker and bingo winnings are yours to keep tax free.

What About Professional Gamblers?

It may seem logical that the tax situation would be different for professional gamblers than it is for occasional punters. When it comes to pure winnings from betting, however, that quite simply is not the case. As we have discussed above these winnings are not taxable and this remains true even for a ‘professional gambler’. That is because HMRC do not recognise professional gambling as a taxable trade.

In fact, within their most up to date ‘Business Income Manual’, HMRC clearly define their position on professional gambling:

‘The fact that a taxpayer has a system by which they place their bets, or that they are sufficiently successful to earn a living by gambling does not make their activities a trade.’ BIM22017

Gambling winnings, therefore, remain free of tax regardless of whether they make up an individual’s main source of income. Where the situation can get a little more complicated, however, is in the case of income related to gambling but not actually direct winnings from gambling. Appearance fees paid to poker players for playing at certain tournaments, for instance, represent payment for a service provided to the tournament organisers and as such may be taxable.

Away from the UK, too, tax laws and legislation do differ and it would benefit a professional gambler outside of the UK to research the specific rules and regulations within their own country.

Online Gambling Losses Taxes

UK Point of Consumption Tax

As we mentioned earlier, Betting Duty for gamblers was abolished in 2001 and was at that time replaced by a 15% tax on gross profits for bookmakers and gambling providers. That tax was initially charged on a ‘point of supply’ basis, meaning that if the bookmaker or company were not based in the UK, then they were not liable. This situation has more recently changed, however.

From the latter part of 2014, the tax on bookmakers’ profits was changed to a ‘point of consumption’ tax by a combination of the Gambling (Licensing and Advertising) Act 2014 and by the introduction of ‘Remote Gaming Duty’. This means that regardless of where they themselves are based, providers must pay a 15% duty on any bets placed by UK customers.

In the 2018 budget chancellor George Osborne announced that the point of consumption tax would rise from 15% up to 21% for all games of chance but sports betting would remain at 15%, for now.

Gambling Taxes In The Rest Of The World

As the above table shows, where various types of gambling are legal there are a variety of different attitudes towards taxation on winnings from those forms of betting. If your country is not listed then it’s likely gambling is not strictly legal and there is therefore no taxation laws.