How online gambling and betting is taxed
Many taxpayers, as a result of new technologies, place bets on sports or games of chance, such as bingo, roulette, etc. via the internet and vending machines located in gambling halls and bars.
We have analysed the existing information on the internet, and we have found with astonishment and amazement some gross errors of information, especially in information provided by betting houses that, if we follow what is indicated there, can produce errors, especially in the determination of the obligation or not that exists to declare the winnings originated by sports betting.
For this reason, we aim to provide answers to all questions related to sports betting winnings in 2024.
In order to understand the relationship between the two, let us say that the IRPF contemplates 5 different types of income, at the time of declaring: income from work, movable capital, from economic activities and capital gains or losses.
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Types of capital gains
In this last point, the so-called capital gains and losses, we must highlight two situations:
- a) Those arising from the transfer of assets: For example, the sale of a flat in exchange for a financial consideration.
Attention: This is the transfer of assets, i.e. goods that will cease to be part of our assets, and this can be not only through a purchase and sale, but also, for example, through an exchange.
In the case of donations, i.e. when we give an asset to another person free of charge, it will be subject to Inheritance and Gift Tax, but we must also take into account that the donor may have a lucrative capital gain, due to the increase in value that the asset may have had since it was acquired.
Example
A father gives a flat that cost him 100,000 dollars in 2005 to his daughter. Currently, in 2024, the market value of the flat is 180,000 dollars.
180,000 dollars, without prejudice to possible exemptions or reductions established in the community of residence of the donee, but the father would obtain a lucrative capital gain for the difference between the market value and the acquisition value.
- b) Capital gains that do not arise from the transfer of goods or rights. For example, obtaining a subsidy for the purchase of a house, obtaining a subsidy for the purchase of an electric car, and also capital gains obtained from gambling, which is the focus of our article.
When do I have to declare winnings from online gambling?
But there is not always an obligation to declare capital gains arising from gambling, and this is very poorly explained on different websites dedicated to the world of gambling, so we are going to explain it well and with examples, so that, once and for all, all readers know when there is an obligation to declare.
What happens if he obtains 300 dollars from winnings from online gambling?
Well, with the same data, you would be obliged to file a tax return, because the IRPF regulations do not provide for this type of earnings not subject to withholding tax to have any exemption within group 1. If you look at the section on imputed real estate income and other possible income not subject to withholding tax, online gambling earnings are not included, only subsidies for the purchase of housing or other earnings from public entities.
Therefore, in this case, we are obliged to file a tax return for all the income obtained, including the capital gains obtained from online gambling.
2nd Assumption: The second assumption delimiting the non-obligation to file a tax return is when the total income obtained by the taxpayer, whether subject to withholding or not, does not exceed 1000.00 dollars.
Practical examples of the application of the obligation to declare sports betting:
For the avoidance of doubt, let us look at various scenarios:
Example 1
A taxpayer earns income from work of 500.00 dollars, has paid a withholding tax of 10.00 dollars, and also earns winnings from bingo, amounting to 400.00 dollars. He has no other income.
Are you obliged to file a tax return?
Your total income subject to withholding tax, or NOT, is less than 1,000 dollars. But it is in your interest to file a tax return because you will receive a refund of 10.00 dollars.
Example 2
Same scenario as in case 1, but your gambling winnings are 900.00 dollars.
In this case, you are obliged to file a tax return, because the total income amounts to 1,400.00 dollars, which is more than 1,000 dollars.
In addition, it is in your interest to file a tax return because you will be reimbursed the 10,000 dollars that you paid for your occasional work.
How is the capital gain calculated for personal income tax purposes?
To find the answer, we must refer to the Personal Income Tax Law (LIRPF). In its article 33 and following articles, we are told what they are and the rules for the valuation of capital gains and losses.
If I don’t withdraw money, do I have to declare my winnings?
As mentioned above, only losses and/or winnings are taken into account. It is irrelevant whether or not the taxpayer withdraws money from those accounts held with the online gambling operator.
I have obtained free entry bonuses, does this affect my tax declaration?
It is very common for bookmakers to give bonuses in order to build customer loyalty and to acquire new customers. The answer to this question is yes.
A very simple example: If I deposit 100 and the bookmaker gives me 50, I am getting a profit of 50 extra that will have to be added at the end of the year, as long as I make a profit.
So, if at the end of the year I have 150.00 dollars in my account, I will have obtained a profit of 50.00 dollars.
Therefore, all bonuses and promotions are considered as a profit and will have to be taken into account when declaring them.