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Taxes on (online) games of chance

How to pay your tax on online casino login winnings

Taxes, it is a subject that many casino login players shrug their shoulders for. Nobody likes to give up earned money, especially if this comes from an unexpected big profit in a (online) casino login. Nevertheless, you often cannot escape it and the Tax and Customs Administration also expects you to properly share your accumulated profits with the government, just as with regular income from wages or investments. The exempt amount is even relatively low, so you officially have to pay tax on your net profits above $ 449. This is called gambling tax and is mandatory under the similarly named Gambling Tax Act (Wet KSB). 

What exactly is gambling tax?

Taxes on games of chance are in all cases a type of game in which the player cannot have full influence on the final outcome. For example, a knowledge quiz with an amount of money to be won would not fall under the regular KSB Act. Games of chance in which no knowledge is required and the player is left to the fate of random cards, slots or dice fall under the KSB Act. Poker in this case is a debatable case for many players, as you may believe that poker is a game of skill with clear strategy and a minimum understanding required. However, the tax authorities think differently about this and so it is also mandatory with poker to pay tax on your winnings above $ 449 

Examples of games of chance are:

The gambling tax originates from the ROB Act, specifically chapter VII.a under the BES Tax Act. This means that players pay tax on the difference between the final prize won and the original stake that resulted in the prize. This can be compared to an investment that is liquidated with a profit, whereby tax is only payable on the profit made.

The Law on ROB was first introduced in 1961, then under the supervision of Queen Juliana. Since then, the policy regarding the ROB Act, in particular the amount of taxes to be claimed, has been adjusted fairly often. For example, the rate was 25% in 2006, where it was increased from 1 January 2006 to 29%. Later in 2018, the rate was even temporarily increased to 30.1%.

An important difference with the traditional way of filing a tax return from, for example, income from wages, is that a player never submits a declaration of a distributed profit above the limit of $ 449. Previously, in the early years of the ROB Act, this was the case. However, in 1981 the responsibility shifted to the organizer of the game in question. The player is therefore not directly liable for tax and is not directly involved with the tax authorities. The money to be paid will be automatically deducted from the total prize pool before it reaches the eligible player.

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KSB Act on online gambling

Anyone who gambles online and thereby exceeds the $ 449 threshold in terms of profit, will eventually have to file a declaration about this themselves. You cannot assume that the site on which you played your game has already paid the gambling tax for you. This has to do with the fact that most online casino logins only pay tax on their own winnings and not on the difference between the player's bet and the prize money to be paid out. As a result, the player is in this case liable for tax himself and it will have to be stated in the annual statement that profits have been made with online games of chance..

Tax Free Prices

As mentioned before, there are exceptions to certain prizes, for example in the case of a knowledge quiz. However, certain forms of games of chance may also be excluded from taxation. For example, all prizes that players can win at the Dutch State Lottery do not fall within the domain of gambling tax. This is because the lottery itself already pays tax to the Dutch tax authorities. When you win an amount as a player, it is ultimately the net amount that you will receive in your account.

Another exception to the rule is it Holland casino login. This has to do with the fact that the casino login chain is owned by the state. In this case, therefore, the same scenario applies as mentioned above. The casino login pays the tax itself so that the players do not have to do this. Mainly because it would be impossible to keep track of which player wins and / or loses and when. 

Income and wealth tax

Suppose you win an exceptionally high amount as a player, for example the jackpot of $ 1,000,000. Do you have to pay both income tax and wealth tax on this? The answer to this question lies somewhere in the middle. Since the government already taxes games of chance, the person in question no longer needs to add the prize money to his or her income. The Tax and Customs Administration will therefore not regard it as sporadic income. 

Subsequently, wealth tax must eventually be paid as usual. The fixed rate from box 3 capital tax applies to this. In 2020, the exempt capital in box 3 is $ 30,846. Everything above that is subject to wealth tax. At the time of writing (22-09-2020), 0.54% to 1.60% tax on box 3 is paid for every Euro above the aforementioned exemption. This exact percentage depends on the amount of someone's assets. The idea behind this bandwidth is that the Tax and Customs Administration assumes that a person with a higher capital can achieve more returns and should therefore be taxed more heavily. However, the actual return achieved is ultimately irrelevant.

Calculation example

To further explain the above explanation about the hypothetical jackpot, we will use a short calculation example. So you can consider yourself lucky, because you just won the jackpot of $ 1,000,000. The current rate is still set at 30.1%, so this would mean that $ 301,000 will go to the tax authorities in the first place. This leaves the player with a net amount of $ 699,000 that will be paid into his or her bank account. It is then relevant whether the amount is still cash in the person's account on the reference date of the new year, 1 January. The percentage of capital tax to be paid usually comes out at 1.2%, so we will also use this in the example for now. Then subtract the exemption from the amount in the account. This looks like this: $ 699,000 - $ 30,846 = $ 668,154. This amount is the amount over which wealth tax will be withheld. That would therefore amount to $ 668,154 * 0.012 = $ 8017.85 in tax. If the remaining amount is still in the account the following year on 1 January, the capital tax will again apply. 

Finally, it is important to take into account that no distinction is made between a price that is donated in monetary form or in commodity form. A new car will therefore be treated in the same way as its monetary value. For example, if you win a brand new Mercedes Benz with a catalog value of $ 100,000, you will simply have to pay $ 30,100 in tax. Unless the organizer of the relevant game of chance has already paid this tax.

Frequently asked questions about gambling tax

Yes, players abroad also have to comply with gambling tax. The relevant country in which the organizer operates the game determines the amount of tax to be paid. Once you have paid this tax abroad, you are exempt from this in the Netherlands. You do have to report it yourself on your regular tax return. The tax form and explanation can be found on the website of the Tax Authorities.

If you gamble regularly as a player, and thereby earn winnings, you must report this monthly. Your starting and ending balance for a certain month is then looked at. According to the law, after receiving your winnings at an online casino login such as Simple casino login, you have one month to complete your declaration. So first receiving the money from the organizer is normal, after all you only have the money to pay tax on it. As a frequent gambler (usually these are the online players) you are mainly responsible for submitting your winnings to the tax authorities in time. If you don't do this, you could run into serious trouble for tax evasion.

As mentioned earlier in the article, the Dutch gambling tax has been temporarily increased from 29% to 30.1%. This has to do with the fact that Dutch legislation on gambling is undergoing an overhaul, especially with regard to online casino logins. Simply put, it is often too difficult to obtain a permit at the moment due to outdated legislation. The intention is that this will change, but until then the current rate increase of 1.1% applies. The government is substantiating the increase because they would otherwise miss out on taxes.