Online Gambling Taxation Guide

Why you should read this page

If you’ll be playing casino games online you need to know what taxes apply to you, and it varies dramatically by country. We cover the most common casino tax percentages and explain how to take care of your tax requirements as you play. As you read you’ll learn about casino licensing, who is liable to pay taxes and more about tax codes to help you figure out if you have to pay in taxes or not.

There is that saying that the two inevitable aspects of life are death and taxes. Gambling winnings are taxed in most, but not all, countries. However, it is very difficult for many nations to enforce the tax legislation when gamblers win online. This is especially true in regions where online gambling is restricted and player activity is not monitored.

Still, chances are that if you’ve won a substantial amount of cash at an online casino, poker room, or sportsbook that you owe taxes. That is, as long as those winnings are not offset by gambling losses that are greater.

Tax Basics

As noted, tax rules concerning gambling vary a lot from nation to nation. If you live in the US and profit from gambling, there’s a 40% tax. However, if you are in the UK and win money when gaming, you pay no tax. In Germany, which instituted a gambling tax in 2012, you’re taxed 5% on any profit. Thus, as you go from jurisdiction to jurisdiction, there is no equity in the tax laws.

Most gambling rules levy taxes not on winnings but on profits. That means the tax you owe is a percentage of your winnings after all other gambling losses have been deducted from those winnings. To clarify, if you win $5,000 on a slot machine, but have gambling losses totally $4,000, you would not owe tax on $5,000, but, rather, on your $1,000 profit.

What Players Need To Do

If you are gambling and winning, or losing, it’s very important to keep accurate records. This is much easier for land-based gamblers than those who participate on the Internet. Then again, it’s much easier for the government to track your brick-and-mortar winnings than those you realize online.

With the idea of protecting yourself and paying as little tax as possible, it’s important that you keep a record of all bets, losses, and winnings. Being able to deduct any cash lost in betting will greatly lower your tax burden. The bottom line is keep accurate records of your gambling activity.

Online Casino Sites And Taxes

Even though online casino players are supposed to pay taxes on winnings, it’s rare that they ever do, as most governments are unable to track a specific player’s success.

It’s estimated that each year that hundreds of millions and perhaps even billions of dollars go unpaid on online winnings. In fact, most governments are not very concerned about these taxes, since online play is so difficult to monitor.

If you’re an online player and you win cash do you have to pay taxes on it if the country in which you live taxes such profits? As most tax collectors would say, “the law is the law,” which means, “yes,” you do owe taxes. But it is rare that anyone pays them when playing online.

As an example, about four years ago it was estimated that Greece could pay off its escalating deficit in total if it could collect taxes owed on online gambling winnings. It tried and failed to get even a small percentage of the cash owed. In a country like the US, where online gambling is not acknowledged as a reality by the government, it’s hard to get anyone to pay taxes on something that does not seem to exist.

Who Pays Online Gambling Taxes?

There is one group that does pay online gambling taxes, and those are the casino, sportsbook, and poker room operators. The countries in which they are sanctioned to operate tax those groups.

Tax rates range quite a bit but are usually between 10% and 20% of the entity’s profits in that country. As an example, in the UK the tax on Internet gambling sites , while in Italy the tax is 20%. This is the primary way that governments make money on Internet-based gambling.

Licensing

Most commonly it is the online casino owners who pay taxes on their profits, as well as having to ante up a lot of cash for their license.

The other way in which governments collect taxes from online gambling sites is by granting licenses to such providers. The primary licensors of gambling sites include Malta, the Kahnawake Mohawk Territory of Canada, Gibraltar, Alderney, Costa Rica, Antigua and Barbuda, and the Netherland Antilles/Curacao.

Countries that provide online gaming sites with licenses collect large fees for doing so and demand that those businesses meet certain regulations and follow specified rules. The online gambling sites are physically located in the country that has granted them their license, and they are sanctioned by that government.

The countries or entities with the strictest licensing requirements and highest fees are Malta, the Kahnawake Mohawk Territory of Canada, Gibraltar, and Alderney. It’s been noted by many that most of the casinos, sportsbooks, and poker rooms that are licensed by these governments are noted for their fairness and reliability.

Your Country’s Tax Code

If you gamble at a brick and mortar casino, then chances are you’re being tracked by the government, and you should expect to pay taxes on any winnings.

As an online and/or land-based gambler, it is important that you know and understand your country’s tax code. Ignorance of the law is no excuse if you’re accused of tax evasion or fraud.

Those who wager and win at brick-and-mortar establishments are tracked much more closely, especially when they win a large amount of money. Due to the nature of the Internet and the manner in which many nations view online gambling, enforcement of tax regulations on individuals is rare, while the providers of services do have to pay the taxman on a regular basis.