We all know that there are two certainties in life, death and taxes.
But the latter is a little more complex and tends to vary from country to country. There’s also a definite correlation between the rate of tax being charged and the quality of public services that are provided. So, for example, Scandinavian countries like Sweden and Denmark are well known for having some of the highest tax rates in the world.
Yet they also offer their people many benefits such as generous pensions, extended paternity and maternity leave and a first rate education system that is 100% free. Then there are places around the world where no income tax is payable such as Monaco. However, if you were lucky enough to break the bank at the country’s famous casino, you could find yourself being taxed on your winnings, depending on your nationality.
(Resident Monegasques are forbidden from playing in the casino so it’s not an issue for them!)
The rules in Canada
If you’re a gambler in Canada and you’re settling down to the sometimes complex job of filling in your tax return the good news is that, as a general rule, your good fortune will not be taxable. It’s inscribed in law, specifically paragraph 40(2)(f)(ii) of the Income Tax Act, that casual winnings from gambling, including most lottery wins, are not subject to tax.
The operative word here is “casual”. That’s because the tax rules concerning professional gamblers are different and, if you fall into this category, you will need to pay. Not great news, but it may come as some consolation that gambling losses are tax deductible, inevitably reducing some of the fiscal burden.
There’s also the grey area of how to define a professional gambler from the very successful amateur. The guidelines are that gambling can be considered to be your main source of income if you:
- Have been earning money from the activity for an extended period
- Play regularly and have specialist gambling knowledge
- Take part in professional tournaments and travel to gamble
- Show organisation and planning in the way that you gamble
So how much will you have to pay if you fall into the category of a professional gambler?
That all depends on the province where you live. So, when choosing an Ontario casino online, you can relax in the knowledge that any winnings you pick up will be taxed at the lowest rates in the country – at 5.05% on earnings under $51,446 a year ranging up to 13.16% if they exceed $220,000 in a year.
However, if you’re in Quebec you’ll be subjected to far more punitive rates of
14% on earnings of under $51,780 up to 25.75% on ones over $126,000 a year.
The US
The US is notorious for having a very complex taxation system, so much so that even nationals living and earning abroad have to complete an IRS return each year.
So it comes as no big surprise that the country is equally inflexible in its approach to taxing the winnings of gambling. In fact, even game show winnings are subject to tax in the so-called Land of the Free. So if a US resident’s luck comes in and they win any amount over $1,200 on a slot machine or over $1,500 on other games like keno they will have to pay a fairly hefty 24% tax on their windfall. And, unlike Canada’s sliding scale, this is a flat rate.
The UK
There’s better news if you’re a high roller on the other side of the Atlantic. Back in 2007 there was a major overhaul of the country’s gambling laws as well as the establishment of a new body to oversee the sector called the Gambling Commission. Before the changes, gamblers had the option to pay 10% tax on either their stake money or their winnings. But new rules shifted the tax burden onto the gambling operators themselves, leaving players to enjoy 100% of their winnings for themselves.
Australia
Australia is another gamblers’ paradise where all winnings are completely tax-free, whether it’s on one of the country’s famous “pokies” (slots games to the non-Antipodeans amongst us) or in any of the casinos you’ll find there on land or online.
Germany
Finally, to come full circle back to the Canadian example, Germany is s country where amateur gamblers playing just for fun can do so free from tax. But professionals do have to declare their winnings and pay tax on them at the same rate as anyone’s non-gambling income. So, there you have it. A quick round-up of gambling tax liabilities depending on the country that you call home. It may be painful to part with tax if it falls within the rules – but remember that paying it must mean that you’re winning too!