In Canada, online gambling remains a grey area. The nation was originally antigambling, but after the authorities gave the various provinces the permission to determine whether to permit gambling, a number of them began allowing lotteries in the 1960’s and a number of casinos were subsequently opened. But are online gambling winnings taxed in Canada?
If so, how are they usually taxed? What about gamers who want to take part in poker tournaments in the country? Are their winnings taxed? Does it matter whether you are a professional player or not? Here we’ll discuss all that you need to know about tax on online gambling in Canada.
When it comes to gambling, Canada has very similar taxation laws to both Ireland and the UK. This generally means that many of the laws followed by European gambling enthusiasts are also appropriate for Canadian residents.
These laws state that gambling winnings are usually not taxable unless considered to be achieved through a business related transaction. Professional players may be subject to taxes but for people playing for recreational purposes, the gambling winners are generally tax-free.
Sports Betting, Lotteries and Games of Chance
It is important to note that a Canadian resident winning a lottery tournament or at any game of chance (for example, slots, roulette or craps) is not subject to winnings income tax. This makes some sense because it is difficult to see someone actually depending on a game of chance for a living.
Section VII discusses the validity of sports betting in the country. As you would expect, it is a spellbinding read. The code doesn’t specify whether it’s illegal to place online bets in Canada. Nonetheless, it is illegal to allow wagers in the country unless you fall under a certain category. To date, no Canadian resident has ever faced legal problems for betting online. The Canadian government has allowed a number of online sportsbooks to be opened in the country. Given the laws are consistently more strict on the business allowing bets, it is easy to see why many reviewers agree that it is legal to bet in Canada unless the government acts against the many sportsbooks that have been opened in the country.
However, sports betting is the main reason for the issue of tax on online gambling in Canada at the moment. These types of winnings were originally not considered to be taxable. The taxpayers in the original cases participated in the regional lotteries. While they were able to improve their financial standing, they were fully dedicated to the sports lotteries and had a systematic and efficient method of playing and consistently tried their luck.
If sports betting is the main source of income, one must state it at the end of the taxation year. If you have a full-time occupation and participate in online sports betting as a hobby, they you don’t have to declare it as a taxable income. If you are in doubt, then you should contact to a tax accountant.
On the other hand, poker offers an exciting probable counterpoint. Again, for the majority of the players and noticeably, the ones playing just for fun, there is a belief against the taxation of online poker winnings because they are not achieved from a commercial point of view. But what about the professional players? While there is no previous case of a professional poker player being taxed on their income from the game, chances are such a scenario could be considered by the authorities.
If a Canadian resident has a successful poker career, earning a reasonable and steady income from the game over a number of years, without any material income generating activity apart from poker, and tries to learn and improve his game, then chances are that that person would be considered to be operating the business of poker and be taxed on his income from the activity.
However, making a proper assessment of this situation would be very difficult. When does one make the leap from being a beginner gamer to a professional poker player satisfactorily dedicated to the game, consistently earning profits and making enough cash? These aspects are easier said than done. This is why the Canada Revenue Authority is cautious to classify individuals as making profits from operating the business of being a professional poker player. In case the government is too aggressive to tax people who play the game, then it could ultimately discover that it has a negative effect on the country’s tax revenues.
To explain the various tax situations on online gambling in Canada, we can conclude that winnings are usually not taxed unless the government considers them to be your primary source of income or you engage in business related transactions.
For most players, this means that while they are Canadian residents and into recreational gambling, their winnings should not be taxed. However, for the increasing number of people who earn a good part of their income through various online gambling activities, precisely online poker, the situation is quite unclear. If your occupation is playing poker, then you are operating a business and your winnings could be taxable.
In order to prevent the government from taxing your online gambling winnings, be sure to consider the following recommendations. First of all, balance your earnings from online gambling with more customary income. This involves finding a part-time business or job to show that you are employed and that you do not work as a fulltime online gambler. Secondly, it is important to keep things under wraps. Boasting about the amount of money you make playing poker online can be a great way to pass the information to the tax inspector. Thirdly, diversify your online gambling by playing in several online casinos. This will allow you to get your winnings in smaller potions and from different sources. Huge cash payments to your account can alert the tax inspector.
These are some tips on how you can make a considerable amount of money through online gambling and still avoid running into troubles with the current tax laws. Nonetheless, the situation may change in the near future if the government is able to realize the impact tax on online gambling in Canada can have on the country’s tax revenues.