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Tax laws for online gambling covers two distinct areas in Canada. First it covers Canadian players and second it covers Canadian online casino operators. Both of these two entities have different tax laws that apply to them. We’re going to cover all of the important information that you need to know when it comes to online gambling in Canada. First up, Canadian players.
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There is very good news for Canadian players. The tax laws in Canada state that winnings from online gambling are not subject to any taxation. The reason behind this is that because gambling isn’t really counted as work or a business, and the income from it is not regular, it would be unfair to apply taxation to money that is made from online gambling. This means that Canadian players don’t have to worry about declaring any gambling winnings on their tax return. However, there is a slight area where Canadian players should take note when it comes to gambling winnings.
Any interest that is accrued from gambling winnings must be declared on your tax returns. This means that if you put your winnings into an investment account, anything you make from that account can and will be taxed. This includes all forms of online gambling from sporting events to casino games to lottery wins.
There are some exemptions when it comes to the tax laws as well. The first is Canadians that are visiting or legally working in the USA. Because the US has a tax on all gambling winnings over $1,200 it will automatically be taxed before it is even paid out to you. In this case you will need to declare your winnings on your tax returns in order to get a refund. So while you will initially pay the tax on the winnings, you will get a portion of this back through a tax rebate.
The second exemption is professional gamblers. People who make their living playing Poker or any other casino game are classed as freelance workers. This means that their earnings are taxable. This does behave in a different manner to traditional business due to the highs and lows that can occur for professional gamblers. As such, players can sometimes see themselves having to pay either no tax or very small amounts of tax if they have been on a bad run.
So, unless you’re a professional gambler you don’t have to pay taxes on your winnings as a Canadian. Things are slightly different if you operate an online casino in Canada though.
Casino operators in Canada have to pay a standard 20% of revenue as a tax. That isn’t 20% of profits, but 20% of all money that comes into the online casino. This means that if an online casino brings in $1,000,000 it would have to pay out $200,000 in taxes. If the online casino had costs of $900,000 then it would mean it made a loss for that year.
However, there are certain ways that Canadian casinos can get deductions on the tax that they have to pay. This means that the overall tax rate is lower than 20% on revenue when deductions are taken into account. The deductions will vary depending on the casino itself and the different services and charges that it has in place. The overall list is quite large which means there are many ways available for casinos in Canada to lower their tax bill.
While this might seem like quite a large amount to tax the casinos, there are other countries that have significantly higher tax rates. In fact, there are some countries that tax both the money the online casino makes and the player. When it comes to taxes, Canada is a lot fairer on gamblers than many other countries.
What a lot of professional gamblers have noted is that the CRA, the Canadian Revenue Agency, is very slow to process gambling taxes. It has led to some players choosing not to declare their gambling winnings, even though they operate as professional gamblers. It goes without saying that this is not an advisable move. Although the agency may process the taxes slowly, trying to avoid the taxes could lead to legal trouble down the line.
When all is said and done, if you want to avoid paying taxes on gambling winnings, then just play casually. If you make gambling your profession then you will have to pay taxes on your winnings in the long run. It’s obviously not that simple for some people, because if you are successful enough then being a professional might be the best option for you financially. But it’s important to be aware of the rules before you make any decisions.
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