The same applies to the interested party in a case in which the Arnhem-Leeuwarden Court of Appeal recently handed down its ruling. In 2012, he won no less than €3,501,699.60 in the Westdeutsche Lotterie. In 2013, the Dutch tax authorities levied €1,015,482 in gambling tax.
Gambling Tax
Gambling tax is payable, amongst other things, by anyone entitled to prizes from games of chance. This tax is payable even if the prize winner lives in the Netherlands but the prize is won abroad.
A prize of no more than €449 is exempt. Prizes won by the same winner in the same draw of the same lottery are added together for this purpose.
Gambling tax amounts to 29% of the prize won. In the case of a domestic lottery, the lottery organiser must deduct the tax from the prize. The prize winner then receives the prize after the gambling tax has been deducted. The prize winner is therefore hardly aware of the tax deducted from the prize.
Germany
In Germany, the taxation of games of chance works differently. The German federal states levy a Lotteriesteuer of 162/3% of the total sales value of all tickets. In addition, a Konzessionsbeitrag of 24% of the total stake is charged. This amount is payable in return for holding the licence to organise the game of chance. Both levies are payable by the organiser of the game of chance.
Double gambling tax
Naturally, the prize winner argued before the tax tribunal that his prize had been taxed twice. He argued that this should be rectified by waiving the Dutch gambling tax.
However, the Court ruled that there was no case of unlawful double taxation. The amount of tax levied in Germany did not depend in any way on the amount of the prize money or its composition.
The argument based on European legislation was also unsuccessful. According to the Court, the 29% gambling tax does not constitute an individual and excessive burden on the prize winner. After all, the gambling tax is levied on the basis of the windfall principle.
Box 3
The prize won is, of course, also part of the assets on which the prize winner pays income tax. The first reference date on which the prize received in 2012 is taken into account for the tax base of income from savings and investments (Box 3) is 1 January 2013. Any gambling tax levied retrospectively later in 2013 may not be deducted from this amount. After all, tax liabilities may not be deducted for Box 3.
The same applies to a prize in the New Year’s Eve lottery. The Supreme Court confirmed in 2011 that the price had fallen on 31 December 2004. The prize (amounting to approximately €20 million!) therefore formed part of the return base for Box 3 in its entirety as at 1 January 2005. This comprised the prize amount less the gambling tax, which, after all, had to be withheld by the organiser of the New Year’s Eve lottery.