AN INTERNATIONAL GUIDE TO POKER TAXES

Monday, 19 September 2016

AN INTERNATIONAL GUIDE TO POKER TAXES

The truth is that nobody enjoys paying taxes.

If you are not a legal professional dealing with these things, then it is highly likely you do not even want to think about these things until the taxation day comes.

Still, for practical and information purposes, it is important to know how taxes are handled in your and in different countries

This article is primarily directed to poker nomads and frequently traveling players, but also to those players that like to enjoy their poker while on vacations.

The legality and taxation policies are important topics any poker player should not, if not for any other reason, then to avoid any uncomfortable situations with authorities.

Not every country handles these things the same way as your home country does, so knowing more only gives you an advantage in avoiding any eventual unpleasantness.

While reading these articles, please keep in mind that we are not legal experts and the information contained here is subject to change since the governments in different countries often pass new laws and regulations on these matters.

Also, it is very important to note that questions about tax laws and regulations concerning gambling often don’t have simple answers. Some countries haven’t even defined or differentiated online and live gambling activities. This situation is understandable because advances in technology have brought about changes that obviously move faster than the legislative processes aimed at their regulation.

TO GET YOU STARTED, HERE ARE SOME IMPORTANT QUESTIONS REGARDING POKER TAXES

Are gambling winnings subject to tax? Do I have to pay taxes on my poker winnings?

• While we will explain how the answer to this question differs from country to country, generally speaking, all income whether generated by poker or otherwise is taxable.

How is this reported?

• While, different countries have different laws and some even consider gambling illegal (in this case, you should not report your winnings as gambling or poker winnings!), most countries require a session based reports.

Do I have to pay taxes if I earn my money on a foreign website?

• Also depends on the laws and regulations in the country you are playing in or your home country. For example, U.S. citizens are required to pay tax on all their income regardless of the origin. In certain cases (if you qualify for a foreign income exclusion) it is possible to pay taxes at lower rates than usual.

Do I need to pay taxes if gambling in my country is illegal?

• Usually, all income is taxable and you are required to pay taxes on it regardless of the source of the income. This comes down to the way you will report the source of your income to the authorities. If you don’t want to get into trouble, you should definitely consider whether admission of illegal activity is the right way to go.

What is the difference of filing yourself to the tax authorities as a professional and an amateur player?

There are pros and cons to each side. For example, the biggest benefit to filing as a professional in the U.S. is that you will be able to deduct your necessary expenses. This means all the money you spend on travel, accommodation, fees etc. can be deducted from the taxable income.

For example, if you profit $70.000 and you spend $30.000 of this money on these expenses, you are liable to pay taxes only on the remaining $40.000.

No the other hand, compared to amateur, professionals in the U.S. are also liable to pay a higher, self-employment tax rate.

HERE ARE SOME GENERALISED ADVICE

Save your receipts. Whether it be flight tickets, restaurant and hotel bills, ATM receipts etc.

These documents will make it easier on you to deduct certain expenses and not pay taxes on unnecessary things.

…

Keeping logs of paying session is also an absolute necessity for live cash players. Logging daily wins and losses is imperative if you want to successfully pass an eventual audit or report correct income deductions.

Fortunately, there are several useful apps that can greatly help in this endeavor. Poker Journal and Poker Income being some of the more popular.

When it comes to comparing taxes and regulation between different countries, one could conclude that the U.S. is one of the stricter and more conservative countries concerning poker and gambling in general.

As you will be able to read in the section below, many countries including UK, France, Denmark etc. only tax poker room operators, leaving the players to keep all of their winnings tax free.

Some countries like France and Italy also don’t tax online poker players.

In theory, Canada and Australia only tax “professionals”, but have no means of proving anyone actually is one.

….

Are unwithdrawn funds considered income? Is that money also taxable?

Yes. Al money you have control over is considered income and is therefore taxable. This is called constructive receipt and it means that that any money credited to your poker account is liable for tax.

…

How will the authorities know that I earn my income playing poker?

If you are playing a tournament and win a big cash prize, the tournament organiyers will file a report to the authorities and make the results public which is just one example of a situation where this is quite clear.

In the case of online poker, things get a bit more complicated. Offshore sites are not required and will usually not report anything to the authorities but if the site for example relocates and enters your countries market legally, they might be obliged to report everything, even retroactively.

Home games are impossible for the authorities to follow but still, any taxable income on your account should be accounted for so you need to be prepared.

Is it possible to deduct poker related expenses?

If you are an amateur player, the U.S. authorities will not allow any deductions but professionals are able to deduct any poker related expenses.

Still, they are a necessity that keeps the system going and avoiding them may result in unwanted consequences in the form of hefty fines and even jail time. In order to avoid this, it is important to be well informed about what is necessary and what is avoidable.

And what are the differences in various countries around the world.

What differences we found in tax policies in some of the most popular poker destinations around the world.