Lottery winnings are not taxed in South Africa because they’re considered capital gains. The National Lottery Commission specially exempts lotto winnings from Income Tax.
However, certain situations will require you to pay taxes on lotto winnings which we’ll explain further in this article. We’ll explain everything you need to know about South African laws and taxes.
Do You Pay Tax on Lotto Winnings in SA?
Lotto winnings are not subject to tax in South Africa. This is because lottery winnings in South Africa are considered capital and therefore are specially exempted from Income Tax and Capital Gains Tax.
On the flip side, you have to pay taxes on lotto winnings if you play lotto regularly or you’re a professional gambler. Lotto winnings have now become a source of income for you and therefore taxes are inevitable.
If you’re not a professional gambler, and you play the lotto and win, you have to inform the South African Revenue Service (SARS) so you don’t get taxed on your winnings.
Credit: SARS
Donation Tax
Donations above R100,000 from your lottery winning are subject to a 20% tax. Donors would have to feel the IT44 form and submit it to SARS before the following month ends. Donations below R100,000 are tax-free.
Non-South African donations to a South African are exempted from taxes.
Is There a Tax on Foreign Winnings in South Africa?
If you’re a Non-South African resident, your lottery winnings are subject to tax in your country. If a South African plays in an international lottery, they are expected to pay taxes according to the tax law of that country.
It is essential to understand the tax laws of a country before you proceed to play their lotteries. However, any lottery games played within the South African laws are exempted from tax.
Lotto Winnings Taxes in Other Countries
Like South Africa, some countries do not impose a tax on lotto winnings while others do. Here’s a table that shows the tax rules in different countries.
| Area | Lottery | Tax | Tax on SA Players |
|---|---|---|---|
| United States | Powerball | Yes |
|
| Mega Millions | Yes |
| |
| United Kingdom | 49s Lunchtime | No | No tax |
| 49s Teatime | No | No tax | |
| Greece | Powerball/Joker | Yes |
|
| Lotto | Yes |
| |
| Italy | SuperEnalotto | Yes | 20% on prizes exceeding €500 |
| Spain | El Gordo | Yes | 20% on prizes exceeding €40,000 |
| La Primitiva | Yes | 20% on prizes exceeding €40,000 | |
| France | Lotto | No | No tax |
| Europe | Eurojackpot | Only for tickets bought in:
| Only if ticket is bought in Spain |
| EuroMillions | Only for tickets bought in:
| If ticket is bought in Spain 20% on prizes exceeding €24,000 |
Conclusion
SA lotto players can enjoy their winnings without worrying about big chunks being removed as tax.
Keep in mind that if you only play lotto for fun, you should always report your winnings to SARS to avoid being taxed. If you’re playing international lottery, be sure to read and understand their tax laws before you play.
FAQ
SA Powerball winnings and other lottery games within SA are not subject to tax.
Yes, South Africans can play overseas lotteries. There are so many online lottery sites that South Africans can access.
Lotto winnings in other countries are usually paid out within a month.
Several online lottery tax calculators help you calculate how much tax you’re expected to pay. You can also consult your lawyer or financial advisor.
It is highly recommended that you declare your lotto winnings to SARS to avoid being taxed unnecessarily in the future.
Lotto winnings are not subject to tax in SA as long as you declare your winnings to SARS.
Foreign winnings are taxed progressively, i.e, the rate depends on the size of your winnings. All local winnings are exempted from Income Tax.
Gifting your lottery winnings is under Donations Tax and is therefore subject to a 20% tax if it’s above R100,000. The tax is to be paid by the donor.
You may get taxed unnecessarily in the future.
You can get professional tax advice from tax-consulting firms, or a financial advisor
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