Taxation of online casino profitsThe excitement of gambling is based on the fact that every now and then, when luck kicks off, you can put a filling in your wallet. The luckiest can get to enjoy even big wins. However, with the profits, the question arises as to whether they can be kept entirely to themselves or whether they should be given a slice to the Finnish tax bear.
The rules may vary from situation to situation, so the player must be careful with their own rights and responsibilities. Let's take a closer look at this article!
When are profits tax-free?
Finnish casinos - or netticasino aimed at Finns - could be roughly divided into two different categories, casinos licensed in the European Economic Area (EEA) and casinos licensed elsewhere. This also serves as a rule of thumb as to whether or not you have to pay taxes on your casino profits. If you play at a casino licensed in the EEA, you do not have to pay any taxes on your winnings. If, on the other hand, you play at casinos licensed in any other area, winnings are counted as taxable income and you must therefore report them on your tax return.
The license of a casino depends on the state from which it operates. To operate, the Gaming Authority will review the business prior to granting the license and will continue to monitor it. You can easily find out which license the casino has acquired, as they should clearly state the information on their own website. It can usually be found in the footer of the front page, but you can also inquire about customer service if necessary.
Why do EEA licenses offer tax-free profits?
Although online casinos operate according to the laws of their own operation, the taxation of players living in Finland is subject to Finnish laws and regulations. Cash and casino games and betting played both online and at physical points are equated with lottery winnings, so the Finnish Lottery Act applies to them. The definition is defined as participation in an activity for a certain consideration, and the potential monetary gain is based either in part or in full on chance.
The second section of the Lotteries Tax Act defines that the winnings of lotteries held in the European Economic Area do not constitute taxable income for the recipient. Finnish law therefore makes it really clear that the profits of foreign casinos are also tax-free, as long as they operate in the EEA.
Online casinos may have to pay lottery tax in the country where they operate, but practices vary widely. However, the lottery tax is entirely in the game organizer's account, meaning it is not visible to the player in any way - except perhaps in certain cases as a slightly lower return percentage.
The European Economic Area currently comprises 31 countries: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Finland, France, Greece, Iceland, Ireland, Italy, Iceland, Latvia, Lithuania, Luxembourg, Malta, Norway, Portugal, Poland, Romania, Spain, France, Sweden, Germany, Slovakia, Slovenia, Finland, Denmark, the Czech Republic, Hungary and Estonia. In the past, the UK was also on the list, but it withdrew from the EU and with it from the EEA at the end of January 2020.
Not all EU countries issue gaming licenses, and casino operations are strongly concentrated in a few centers. Malta in particular is known for its vibrant gambling business. Many online casinos that used to operate elsewhere have relocated their headquarters to Malta in recent years, as the country’s taxation is quite favorable to businesses. Most of the casinos aimed at Finns operate under the Maltese MGA license.
These casinos require you to pay taxes
You will come across many casinos online that have obtained their licenses from outside the European Economic Area. This is because it is easier and cheaper to obtain them than European licenses.
Numerous casinos for Finns have obtained their licenses from the state of Curacao, which is the best known of non-European licensors. Casinos operating under this black-blue-yellow logo can be good venues, but their winnings should always be taxed. It is also worth remembering that their activities are not as strictly controlled as those of European casinos - it is therefore advisable to opt for EEA casinos for a number of reasons.
Other potential licenses include Costa Rica, Kahnawake, Antigua and Barbuda. You should avoid playing with these, as you will have to pay taxes on your winnings, and there is no guarantee that the venue will be reliable.
Jackpot wins and taxation
Sometimes it can happen that luck kicks in properly and a jackpot win pops on the screen or lottery ticket of the gaming machine. The first moments certainly go from surprise to recovery, but after that, thoughts turn to the repatriation of profits and possible taxes. However, it is worth considering tax issues in advance, as it is also possible to raise jackpot winnings tax-free.
The rules for jackpot games regarding taxation are not quite as clear as others. If the jackpot draw takes place in any EU country and you have played at a casino licensed in the EEA, you will be able to withdraw your huge winnings completely tax free. If, on the other hand, the draw is made elsewhere - for example, the American Mega Million and Powerball - you will probably have to pay taxes on your winnings, possibly also to the country of origin.
In addition, you should definitely pay attention to the casino's own rules. Sometimes gaming sites stipulate in their terms that part of the jackpot won on the site remains with the casino. This is, of course, unfair to the player, so you should favor venues where this rule does not apply.
Where to go for more information
The guidelines in this article should be taken as guidance, as case-specific exceptions may occur. If you have the slightest doubt about tax matters, you should always ask your home tax authority for more information. It is always a better idea to prepare and know in advance than to wait and be surprised to be sad afterwards.
In practice, small and medium-sized profits are quite easily overlooked by the taxpayer if you do not report them yourself. However, this cannot be recommended in any case, as sanctions are more annoying than paying the tax properly.