The usual number, the tenth from work or the one shared with family or friends… The Christmas lottery hype will once again spread luck this December 22 throughout the entire Spanish geography. Although it is not the raffle that distributes the most money to the participants, it is the one that generates the most attention and in which, in one way or another, more people attend. The public accounts also do so, through the Tax Agency, which is in charge of collecting money from the main winners of the draw, although not on the total amount of the prizes.
Until 2013, all the money won in this and other raffles, both public and from some institutions such as Once or the Red Cross, was exempt from paying taxes. That year, with the economic crisis taking its toll on the public accounts of the Ministry of Finance led by Cristóbal Montoro, the special tax on lottery and betting prizes was implemented.
Of course, the rule has been relaxed over the years and the amount exempt from tax among the prizes is increasing. Upon its entry into force, only the first 2,500 euros were exempt from taxes, a figure that would later rise to 10,000 euros and, later, 20,000 euros. As of January 2020, the maximum tax exemption limit was established at 40,000 euros.
The winners this Sunday will have to pay a portion in taxes, regardless of how they participated in the Christmas raffle and whether they bought a ticket, a coupon or a participation in the school association. Of course, not all the winners will have to give a part to the Treasury. The current limit of 40,000 euros means that only those awarded the Gordo or a second or third prize will have to pay taxes. Therefore, the fourth (20,000 euros for the tenth) and fifth prizes (6,000 euros) or, of course, the stones (100 euros) are excluded from this taxation.
In fact, even if the prize exceeds 40,000 euros, the existing 20% withholding does not apply to the total. The maximum exempt amount is subtracted from the prize received and the percentage of tax payable is calculated on the remaining amount. For example, if our tenth player wins a third prize, which grants 50,000 euros per participation, we would have to pay 20% taxes on 10,000 euros, since the first 40,000 are exempt. That is, for a prize of 50,000 euros, 2,000 would have to be paid.
In the case of the second prize, awarded with 125,000 euros, the tax is calculated on 85,000 euros, which will mean 17,000 euros of taxation. Already in the case of Gordo, whose prize is 400,000 euros per tenth, the Treasury will receive 72,000 euros in taxes.
The State Lottery and Betting Society estimates that, if the total of 193 series that have been put on sale this year are sold, up to a maximum of 2,702 million euros in prizes would be distributed, 112 million more than last year. As explained by the union of Gestha Treasury inspectors, this total of prizes would be what would be awarded if all the tenths for sale were sold, which would imply a maximum total collection of 3,860 million euros.
However, as explained by the union, only around 80% of the tenths are sold, so we would be left with an approximate collection of 2,880 million euros. From this we would then have to subtract the prizes, which are around 70% of the proceeds, leaving a total for the public administration of 864 million euros. Furthermore, in the event that the first three prizes are distributed in their entirety, the Treasury could earn up to a maximum of 156.5 million, according to its calculations. That is, the Christmas Lottery draw will represent around 1,000 million euros in revenue for the Treasury. This union proposes that the exempt minimum of 2,500 euros that was initially set be recovered.
And, when and how are these taxes paid? To collect a prize we have two options. In the event that our tenth is awarded with an amount less than 2,000 euros, we can go to any lottery administration to receive it. If this limit is exceeded, as is the case with the main prizes, it must be collected at a bank. In this case, the banks or savings banks will be in charge of applying the withholding on behalf of the Tax Agency at the time of collection by the winner. When paid at that time, the winner will not have to pay taxes on those amounts received at the time of the income tax return even if it is a capital gain, since it is exempt. In addition, you will not have to prepare any self-assessment document because the withholding will have already been made before collecting it.
In the event that we have shared a winning tenth with other people, the withheld tax will be distributed proportionally to each person’s participation. In the case of shared prizes (groups of friends or relatives, clubs, brotherhoods…), in which the prize is distributed among all the participants, the 40,000 euros that are exempt must be distributed among all the beneficiaries in proportion to their percentage of participation and, whoever proceeds to distribute the prize, must appear as the sole beneficiary (or as collection manager) because he/she has stated so, at the time of collecting the prize he/she must be in a position to prove it 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.
The tax applied to the Christmas lottery is the same that affects other draws awarded by State Lotteries, the Eleven or the Red Cross draws, in addition to the different communities that have their own draws. In total, in 2021 the State earned 368 million euros. It was the year with the lowest collection for this tax since it was established in 2013. The maximum was reached in 2014, with 568 million euros.
The tax that applies to the Christmas lottery is the same that affects the others granted by the public lottery company, those of Once or those of the Red Cross, in addition to the different communities that have their own raffles. In total, in 2022 the State collected 446 million euros, almost 80 million euros more than in 2021, the year with the lowest collection since the tax was established in 2013. The maximum was reached in 2014, with 568 million fundraising euros.
Wide benefits for the State
Although most of the prizes awarded this Thursday by the children of the San Ildefonso school in Madrid are exempt from taxation, there are other ways in which the activity of the State Lottery and Betting Society of the State (Selae) results in the public coffers. Its prizes, through this tax, collected during the last full year (including the rest of the draws it carries out) 334.7 million euros. Added to this are 703 million euros that the State receives thanks to the corporate tax of this company.
Selae is the Spanish state public company that generates the highest profits per year. Last year, as recorded in its annual accounts, it ended with a profit of 2,918 million euros. The figure was obtained after earning 10,255 million euros last year and contributing 6,160 million euros in prizes. The company’s profit translated into a dividend for the State of 2,667 million euros, which went to the Public Treasury.
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