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Taxation applied to online gambling winnings

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Taxation applied to online gambling winnings

In recent years there has been an increase in online gambling in our country. Despite the latest regulation of the sector by the Government through the imposition of a series of restrictive measures aimed at discouraging this practice, the truth is that every year more and more users are accessing the different platforms that offer online betting and gambling. The State Tax Administration Agency (AEAT) has not remained oblivious to this situation and has focused its attention on the winnings from this type of games, knowing that it is an important source of revenue.

Thus, it has launched a campaign aimed at bringing to the surface those winnings declared incorrectly or, directly, not declared at all, either due to ignorance on the part of the taxpayer or with the intention of evading their tax obligations. This article aims to clarify the taxation of these gains and the consequences that not declaring them may have for the taxpayer.

How and under what circumstances are winnings derived from online gambling declared?

The winnings obtained through online gaming are classified as capital gains not derived from the transfer of any asset and, as such, must be declared in the Personal Income Tax (IRPF), although not in all cases. Only in those cases in which the declarant does not obtain any other type of income, and the profits from gambling do not exceed the amount of €1,000, there will be no obligation to declare; on the contrary, when the net profits from gambling, or together with other income, exceed the amount of €1,000 or are obtained jointly with other income from work in excess of €22,000, there will be an obligation to declare.

Example. A person who obtains €999 from online games and has no other income will not have to declare this gain, since he/she is not obliged to file an income tax return.

A person who obtains €100 from online games and an income from work of €24,000 must declare the total income obtained, i.e., €24,100.

The winnings declared must always be the net winnings obtained during the calendar year, and it is not possible to offset losses from other years. Losses of a fiscal year can only be deducted up to the limit of the winnings obtained in the same fiscal year, i.e., if during 2021 a person has lost 600€ in an online game and has won 500€ in another game will only be able to deduct 500€ of losses.

Taxation brackets for winnings derived from online games

Winnings derived from online games are included in the personal income tax base, in such a way that they are taxed jointly with the other income obtained by the taxpayer during the same year. The percentages assigned to each bracket of winnings are established by the Ministry of Finance, being for the year 2022 the following:

  • Up to 12,450 euros: 19%.
  • From 12,450 euros to 20,200 euros: 24%.
  • From 20,200 euros up to 35,200 euros: 30%.
  • From 35,200 euros to 60,000 euros: 37%.
  • From 60,000 euros up to 300,000 euros: 45%.
  • Income over 300,000 euros: 47%.

Thus, returning to the previous example, a person who obtains income of 24,100 euros between work income and profits from online gambling will be taxed as follows:

  • 12,450 at 19%.
  • 7,750 at 24%.
  • 3,900 at 30%.

What if I do not declare?

The Tax Agency has set its eyes on the gaming sector. Through the signing of information exchange agreements with the General Directorate of Gaming Regulation, the Treasury receives all the data collected on the identity and activity of the players in each and every one of the different online gaming platforms regulated in Spain, so not declaring the profits obtained entails a significant risk in case of being discovered. In addition to paying the amount that would have corresponded together with the corresponding late payment interest, the penalties can range from 50% to 150% of the fee.

Ignorance of the law does not exempt from compliance, so it is very important to always go to a professional to receive the appropriate personal advice.

The LETSLAW team remains at your disposal to solve any type of consultation related to the matter.

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