A detailed Guide on Gambling taxation in Canada

Taxes have always been an area of concern amongst many online players. The issue of gambling taxation remained a top frequently asked question for the longest time. Unfortunately, the answer to this topic isn’t’ a one-fit-all answer. This is because tax laws vary from country to country and what might tax-free winnings for a particular player may be different for others. This article is a thorough examination of the topic of Canada’s taxation. You will understand the Canada lottery tax, Canada casino tax, and much more.

Should Canadian players pay taxes?

Gambling winnings in Canada are exempt from taxation unless the winnings emerged from a business-related transaction, or the winnings are from professional players such as professional poker bettors. Therefore, recreational bettors don’t have to be bothered about paying taxes on their betting earnings. The income tax act, paragraph 40(2) (f), is used in deciding whether one is a professional or a recreational player. One criterion that is used to differentiate the two types of players is whether gambling earning is the sole income. If gambling winning is the main income, then there is a high likelihood for you to be classified as a professional. Professional players are mostly pro-poker bettors and players who wager on skill games, such as poker and baccarat. Therefore, it is very unlikely for a online casino or a sports bettor to be classified as a professional player.

Gambling taxation for professional players

As explained earlier, professional bettors are expected to declare their winnings, remit their tax deductions or make claims to the Canada Revenue Agency. In doing so, bettors are guided by the tax schedule below.

 For instance, if your gross income, including gambling winnings, is CAD 47,000, you will be required to remit 26% of your gross income to C.R.A. 

Is there a difference in taxation of online and offline winnings?

Online and offline winnings are treated the same by The Canada Revenue Agency. Therefore, if your winnings emanated from an online source or if it emanated from an offline source, what will be used to guide your declaration of taxes is whether the earnings were realized from a business transaction or if the player was a professional player. Recreational bettors who wager on online sportsbooks or physical racetracks don’t have to worry about declaring their earnings.

Is there a discrepancy in interstate laws?

Canada has different provinces, but they all have a homogenous approach to the issue of taxation. Whereas the provinces might have different regulatory bodies and different gambling laws, on the issue of taxation, they all treat betting earnings as exempt except in the cases earlier mentioned.

How are Canadians gamblers treated in the US and other countries?

Different countries have different treatment of taxation on gambling earnings. For instance, if you are Canadian but gambling in U.S., you will be subjected to a 30 % withholding tax on your winnings. The good news is that the U.S. and Canada have a treaty in place that allows readjustment of the taxes if Canadian players have is sufficient information to make claims for expenses and betting losses. To benefit from this agreement, you will need to have a US tax number and make the formal claim.