Taxes on Casino Winnings - Large Variations Between Countries

  • 2022-06-20

When it comes to online gambling, all the countries on the planet can be separated into three categories. The first category is the one with countries that explicitly ban this activity. With punitive legal ramifications for those who break the rules. The second category is made up of countries where online gambling falls into a legal gray area. In layman’s terms, this means that gambling is neither legal nor is it explicitly illegal. Many countries fall into this category when considering iGaming or internet casinos. In many cases, gamblers won’t face any consequences if engaging in the activity. However, there is little government regulation or assistance if something goes awry.  With fewer consumer protections, scams are more prevalent in these environments.

The final category is the one where most countries from Europe and North America fall into. It’s the category of countries where the online gaming market is not only legal but regulated. What this practically means is that only licensed sportsbooks – the ones that pay tax – are allowed to operate. This category, however, can be further divided into two additional subcategories – countries where players pay no tax and countries that charge tax on gambling winnings.

Let’s see how the Baltic states fare in comparison to other gambling-friendly countries.

Countries Where You’re Not Charged on Your Gambling Winnings

None of the Baltic states – Lithuania, Estonia, and Latvia – require taxes on gambling winnings. Instead, taxes are levied on the sportsbook/casino operators directly. Individual gamblers are left out of the equation. The situation is similar in Finland and the Scandinavian countries. In fact, a big majority of countries with a significant online gambling industry do not tax individual players on their winnings.

Australia is an excellent example. The land down under is the country whose residents gamble the most on average. It’s estimated that Australians spend an average of AU$1,048.56 on casino gambling and sports betting per year. Although they’re spending a significant amount of money on gambling, individuals are not required to pay any taxes on their winnings.

The story is the same in the United Kingdom, which has a significant number of online gambling options. Players in Canada are not taxed either. Countries in the Caribbean, South America, the majority of Africa, and Asia are all tax free on gambling winnings.

Other major gambling-friendly countries where there’s no tax on winnings include:

- Spain

- Italy

- Russia

- Romania

- Hungary

- Czech Republic

- South Africa

- Macau [only non residents and foreigners gamble tax free]

As you can see,the United States is not on the list. The country with the biggest online gambling market does require taxes on individual winnings. While it is only in certain situations, it isn’t a tax free scenario.

Countries With Gambling Tax on Winnings

In the United States, online gambling is legal and regulated in more than half of the states. Each state has its own gambling laws and regulations. Despite differing regulatory frameworks, they all have one thing in common: casino/sportsbook winnings are taxed.

This has nothing to do with individual states and their gambling laws but rather federal tax laws on gambling winnings. Even though it is a federal tax, US gamblers don’t always have to pay the tax. Taxes are required on gambling winnings over certain amounts. Individuals must report winnings to the Internal Revenue Service (IRS) only if their winnings are:

- Over $600 on odds of 300.00 or higher

- $1,200 or more on bingo or slots

- $1,500 on keno

- Over $5,000 on poker

What’s interesting is that in Las Vegas, foreign gamblers are not liable for any tax. Nonresident aliens are exempt from paying tax on nonbusiness gambling income. This practically means that only American gamblers are taxed in the United States.

It’s a similar case when it comes to the US’ southern neighbor. Mexican bettors have to pay a 1% federal tax, as well as the state tax on gambling winnings, which can be anywhere between 4 and 6%.

In Europe, not all jurisdictions are tax free. Germany, for example, not only taxes winnings but stakes as well. German gamblers need to pay a 5% fee on any stake wagered whether they’re betting online or playing online casino games. Those who lose are not required to pay more tax. However, an additional tax of 5% is levied on their winnings.

In France winnings over €1,500 are taxed at 12%. However, French gamblers aren’t the ones liable for taxes on individual winnings. Instead, that’s the duty of sportsbook/casino operators to pay the taxes. This rule only applies to the French gamblers who play locally. Those who do so at offshore gambling sites are required to pay the tax on winnings on their own.

To Sum Up

In some countries, gambling winnings are considered taxable income. However, there are also many countries where you can keep your gambling winnings without having to worry about paying taxes on them. It’s important to be aware of the tax laws in your country when it comes to gambling, as the amount you may have to pay in taxes can vary greatly depending on where you live.