Where should I pay taxes if I win a foreign lottery? Do I declare and pay to my country only or to the country where I won the lottery? Do I pay to both my country and the foreign country where I won the lottery? To give a balanced answer to these questions, you must first know the tax rules of both your home country and your foreign country of residence. Tax rules vary in different nations. While some require citizens to pay taxes on lottery winnings whether in or out of the country, others do not.

Where Should I Pay Taxes If I Win A Foreign Lottery? Why It Is Important To Know Your Country’s Tax Laws

As stated already, to determine where you should pay your taxes if you win a foreign lottery, you must first know the laws. Indeed, there are countries where it is mandatory for citizens to pay taxes whether they won the lottery home or abroad. Similarly, there are countries where you don’t even have to pay taxes on your lottery winnings. Still, in some countries where the government banned the lottery, you can’t risk the authorities knowing that you won or even so much as participated in the lottery. These countries include Cyprus, Poland, Belarus, Switzerland, Middle Eastern countries, etc. This is why it’s important for you to familiarize yourself with your country’s tax laws on lottery first.

So, if your country allows for the lottery, where do you pay the taxes you win on one in a foreign lottery? Which countries demand taxes on foreign lotteries and which countries do not?

Countries That Demand Taxes On Lotteries

Lottery Taxes for US Citizens

The United States tax laws demand that citizens report and pay taxes on their lottery winnings whether they won it at home or abroad. For citizens who won the lottery abroad, they must prepare to pay their taxes in the event of their return. The Internal Revenue Service (IRS) is the organization in charge of collecting these taxes and they encourage their citizens abroad to take a foreign tax credit. This way, you can only pay your tax on lottery winnings in one country.

Still, there are exceptions to this rule although this is in few cases. Some US citizens may request not to pay taxes on their lottery winnings (or general income). Usually, they have to meet certain requirements before the IRS will grant them such requests. Even though US citizens are expected to pay taxes on lottery winnings to the country whether they won it at home or abroad, state laws differ. For example, the state of California does not demand taxes on lottery winnings from residents. However, to ensure this, you must buy lottery tickets in the state.

Lottery Taxes for Australian Citizens

In Australia, the tax rules on lottery winnings are different. When you win a lottery, whether at home or in a foreign country, you’re free to take the whole sum without paying a dime in tax. However, if you’re a professional gambler, then you have to pay taxes. Australian laws consider professional gamblers as workers who earn incomes. So, if you’re a professional gambler in Australia who won the lottery, then you must pay your tax.

Yet, how can the Australian government tell if you are a professional player? If you appear once on a lottery show, they will not tax you. However, appearing frequently gives the notion that you receive your income from lotteries. This is one way they can tell if you’re a professional player and thus, require that you pay your tax from your lottery winnings.

Yet, despite the fact that the Australian government does not tax its citizens on lottery winnings, you may still pay taxes on them nonetheless. Here are some ways it works: If you put your lottery winnings in the bank and it gathers interest, then you must pay taxes. Secondly, if you use your lottery winnings to buy a house or a car, then you must pay taxes. Summarily, even though the government does not collect taxes on lotteries, you may still end up paying taxes on what you buy with your tax money.

Lottery Taxes For India Citizens/Residents

In India, the government is strict in enforcing tax laws on lottery winnings as it is written in their constitution. When you win a lottery prize, the company may deduct the tax of 30.9% or 31.2% (depending on the state) before handing over the remainder. If the lottery company doesn’t do that, then you have to pay your tax yourself. Some countries weigh the lottery prize to decide whether or not it is taxable before collecting taxes. In India, it does not matter if the lottery prize is taxable or not, you must pay taxes on every lottery prize you win.

Why is the Indian government strict on collecting taxes on lottery winnings? Well, the government uses 3% of the taxes to boost the health care and education sector in the country. However, you can escape tax payment on your lottery winnings. How do you do this? If you win the lottery and send it in as a donation to charity, then there will be no need to pay tax on the lottery winning. Some citizens may want to take advantage of this exception by lying that they paid their winnings into charity. However, the Indian government will conduct a proper background check to make sure you paid the winning into charity.

Lottery Taxes For Russian Citizens

Unlike India, the tax rate in Russia is not as high. In fact, the Russian tax is one of the lowest in the world. The tax laws demand that the lottery winner pay only a tax of 13% on their lottery prize and this law applies to all citizens. Thus, if a Russian citizen wins a foreign lottery abroad, they are required to pay their 13% tax. The foreign country may also demand that all residents in their country (whether citizens or not) pay their taxes. However, the Russian Federation has entered agreements to avoid any incident of their citizens having to pay taxes on the same lottery winnings in two different countries. So, you can only pay your tax when you return home to Russia.

Similarly, if you’re a foreign resident in Russia, you have to pay taxes on your lottery winnings. However, you must have spent a minimum of 184 days before the government will charge you 13%. If you have spent less than this and you win the lottery, the laws demand that you pay 30% instead.

So, what happens when a Russian citizen or resident tries to avoid paying taxes? When the authorities get information about this, you will have to pay five percent of the tax owed for every month you delayed. If you still refuse to pay still, then the law will fine you a 20% amount for evading your tax. Refusing to pay your tax is a criminal law in Russia and that could earn you a fine of up to 500,000 rubles or six months to three years in jail.

Countries Where You Don’t Have To Pay Taxes On Lotteries

Lottery Taxes For Germany Citizens

In Germany, you do not have to pay taxes on lottery winnings at all. Germany does have strict laws on tax payments: taxes could range from as low as 14% to as high as 42%. The more income you receive, the higher the tax you pay. However, this does not apply to lottery winnings. It does not matter whether you win millions of euros or a prize equivalent, you get to keep all the money to yourself. This may sound unbelievable to the ears but it remains a fact.

Lottery Taxes For UK Citizens

Another country where you don’t have to pay taxes on your lottery winnings is the UK. Why is this so? Well, the UK government doesn’t categorize such winnings as income. So, they allow you keep the money to yourself. Yes, it does not matter whether you win millions of pounds or its prize equivalent. You can have it all to yourself.

Other countries that do not require taxes on your lottery winnings include Austria, France, Ireland, among others.

Conclusion

Where should I pay taxes if I win a foreign lottery? The answer to this is for you to know your home country and country of residence’s tax laws. Then, you can know where to pay the taxes on your lottery winnings.