Big jackpot wins and the thorny issue of tax
So, imagine you have spun the Mega Moolah slot, the Jackpot Bonus Game loads up on screen! You click to start the wheel spinning and then it stops on that gloriously single white pocket on the wheel.
You have just become the latest player to land the incredible Mega Moolah jackpot prize. After that initial excitement and rush of adrenaline, you now have to wait a short time while your win is checked and validated. Once it is, you know that you are a genuine Mega Moolah winner and you can now start to think about what you are going to spend your money on.
Spending your good fortune on a win like you get on the Mega Moolah slot, or the lottery, or indeed on any form of gambling is all part of the enjoyment you have once you win, but there is something that you need to be aware of and it is not something that is particularly pleasant.
And that is the issue of tax and whether or not you need to pay tax on your winnings, should you be fortunate enough to land a significant prize when gambling.
The muddied waters of tax and gambling worldwide
I would love to be able to come to you here and tell you a simple fact that you either would, or would not, have to pay tax on any winning from gambling and that this rule applied across the globe. Unfortunately, the world doesn't work that way and the truth of the matter is that whether or not you will be liable for tax on any gambling winnings, is dependent entirely on where you live in the world today.
Let's begin first with some good news.
The good news for punters
The good news for punters living in Canada, New Zealand, the United Kingdom, Ireland, Finland, Sweden, Norway, Portugal, Czech Republic, Denmark, the Netherlands, Bulgaria and Italy, and perhaps some other parts of Europe, is that you will not have to pay any tax on your Mega Moolah wins. The rules for each nations vary somewhat, but essentially what you have here is that a significant gambling win is not ruled as income, or a form of capital gains, but instead is viewed as 'receipt of luck' and as such, as it is not guaranteed, then the person does not have to pay any tax.
And now the bad news
Unfortunately for some lucky winners, in some countries around the world, even if you are lucky enough to win a big prize, then you will still be eligible to pay tax on those winnings. Finland is an interesting example of just such a country as it has some complicated gambling laws in place when it comes to taxing winners.
In Finland, some gambling games are viewed as tax-free, these includes games that are games completely of chance. However, you will pay tax on your winnings at gambling if it falls into one of a number of categories, including if you are a Finnish-based player who wins a lottery operated outside of the European Economic Area (EEA).
Countries that belong to the EEA include Austria, Belgium, Bulgaria, Czech Republic, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
So, what that means is if you are in Finland and decide to play an unlicensed jackpot game which is based outside of the EEA, and you are a winner, then whatever your winnings are in Finland, you would be liable to pay tax on. However, if you won the Euromillions lottery, as this is based in the EEA, you would not pay tax on the win.
The situation is slightly easier for Germany-based players as any winners need to pay 5 percent of their total winnings in taxation. So if you were to win a jackpot from Germany of say €10 million, for example, then you would have a tax bill of €500,000 to pay from your winnings.
Mega Moolah is not available in France at the moment and French players may be glad as they have to pay a whopping 12 percent of their winnings on any win over €1,500 in taxation to the French authorities. France is also extremely punitive on casinos, which explains why so many casinos are located in the tax-free haven of Monaco.
However, this pales into insignificance when compared to the tax bill you are likely to receive if you hit a massive cash prize in the United States, perhaps in Las Vegas or similar. If you are an American native and land a win of a considerable size, then you will be hit with a bill of 25 percent of that money to be paid in taxes. Casinos are legally required to withhold this money and report any wins above a certain amount to the IRS to ensure that they are reimbursed for your good fortune.
That sounds bad enough, but also in the US, you could also be responsible for paying a further 14.6 percent of your windfall in federal taxes. Even then, it does not end there as if you win, say the Powerball lottery and decide you want your prize as a lump sum, then the total amount you win is subject to an additional deduction of 38 percent before you get your cash and then you have to pay all the other taxes with the exception of Florida and Tennessee, which do not have state income tax, and Californian law prevents taxation of lottery winners.
The only way to receive the full Powerball lottery amount is to receive your jackpot in annuity over 29 years. The annuity offered by Powerball is different to other lotteries. If the winner chooses annuity, Powerball then invests the entire win amount in various securities that are backed by the U.S. government. The winner wouldn't be taxed on investment income with the annuity because Powerball is actually the one investing the money and it doesn't pay income tax.
What about holidaymakers visiting the United States? You may think that as a holidaymaker in Las Vegas and not an American citizen you may be immune to taxation in the US, well think again. Any non-resident winner of a significant prize in the US pays 30 percent of their winnings to the IRS in taxation. Which means if you land a $10 million jackpot playing a game in Vegas, then $3 million of that goes straight to the IRS. Then when you come home to, say, Finland, you'll likely be taxed the highest personal income tax rate of 62.20 percent on the remaining $7 million. So you would end up with "just" $2.6 million, which is still great amount of money, but how on earth is that justifiable?
It does seem somewhat unfair that big money winners are treated so differently in different parts of the world regarding tax, but it pays to know exactly what you will be liable to owe should you be fortunate enough to land a big prize and your own mega piles of moolah.
We recommend playing jackpot games in the jurisdiction, or within the economic zone that you live in, to avoid being sucker-punched by the tax man. Remember, if you live in the EEA winning Mega Moolah is mostly tax-free! This however may change with Brexit.
Byline: This article was published by Mega Moolah expert Henry. Media and other enquiries.