The prizes from the Christmas lottery on December 22 (El Gordo) will pay less taxes than what they had been paying until this year. Thus, while last year a prize was exempt from taxation up to 2,500 euros - and 20% was paid for the rest - now that amount rises to 10,000 euros.
If the prize is shared, it must be accredited to the Treasury, and the 10,000 euros exempt will have to be distributed proportionally among the beneficiaries.
The controversial taxation of lottery prizes
Law 16/2012, of December 27, which adopts various tax measures aimed at consolidating public finances and promoting economic activity, subjects to taxation, through a special tax, among others, prizes paid corresponding to lotteries and bets organized by the State Lottery and Betting Society (SELAE).
The aforementioned rule establishes that the recipients of these prizes, whatever their nature, at the time of collection, will bear a withholding or deposit on account that must be made by the agency paying the prize, that is, the SELAE.
It will be required independently with respect to each winning tenth, fraction or lottery coupon or bet. But this year the prizes will be taxed less. This is due to the modification of the tax-exempt minimum, which underwent a modification in the month of May.
Until then, and since 2013, the controversial lottery tax was established, by which all prizes exceeding 2,500 euros had to be taxed and accountable to the State coffers with the 20% of the prize.
For this special Christmas draw, prizes whose full amount is equal to or less than 10,000 euros will be exempt. Prizes whose full amount exceeds 10,000 euros will only be taxed with respect to the part of the same that exceeds said amount.
The base of the withholding of the special tax will be formed by the amount of the prize that exceeds the exempt amount. The withholding or deposit percentage on account will be 20 percent.
Thus, for example, a prize of €100,000 would be taxed to the 20% on €90,000 (100,000 – 10,000), so a withholding of €18,000 would be made and €82,000 would be received.
The SELAE must proceed to identify the winners of the prizes subject to tax, that is, those that are greater than €10,000 per tenth, regardless of whether the prize has been obtained by one person or jointly by several people or entities.
In other cases, if there are several prizes, these are not cumulative. That is, if you have several winning coupons but none reach 10,000 euros, all of them will be exempt from any tax, even if they total more than 10,000 euros between them.
If the tenth is shared, it must be accredited to the Treasury
In the case of shared prizes (group of friends or relatives, clubs, brotherhoods...), in which the prize is distributed among all the participants, the €10,000 that is exempt must be distributed among all the beneficiaries in proportion to their percentage of participation, and whoever proceeds to distribute the prize who appears as the sole beneficiary (or as collection manager) having stated so at the time of collecting the prize, must be able to prove to the Tax Administration that the prize has been distributed to the holders of participations, therefore the identification of each winner as well as their percentage of participation is necessary.
Case of non-resident taxpayers and Corporation Tax taxpayers
Income tax taxpayers or non-resident taxpayers without a permanent establishment who are successful and have borne the withholding at the time of payment of the prize will not have to submit any other self-assessment.
Additionally, non-resident taxpayers without a permanent establishment who are eligible and have borne the withholding at the time of payment of the prize may request the refund that may correspond to them by application of an agreement to avoid international double taxation.
Corporate Tax taxpayers who obtain a prize subject to the special tax must include, as they did before January 1, 2013, the amount of the prize between the income of the period subject to the tax and the withholding/payment on account of the 20% supported like another payment on account.
The threshold will go higher in the coming years
The change that occurs in the taxation of lottery prizes is the result of a modification included in the 2018 budgets approved in the middle of the year. In this way, El Gordo, the second prize (125,000 euros for the tenth), the third prize (50,000 for the tenth) and the fourth (20,000) will be taxed. From there on down, they do not bear any tax burden.
As stated legally, the threshold will be expanded in the following years. Thus, it will rise to 20,000 euros in 2019 and reach 40,000 euros in 2020.
This situation leaves a curious fact: those who win in the El Gordo draw will pay more taxes than those in El Niño, a couple of weeks later, with the turn of the year.
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