Are you required to pay tax on Gambling and Lottery winnings in South Africa?
Have you won a big lottery jackpot in South Africa recently? Or are you constantly dreaming about the day you cash out a huge prize?
Amidst all the excitement and dreams, you might be wondering if the government is going to tax your winnings and take a big chunk of it away from you, which let’s be honest, it probably dampens your excitement a little bit. But worry not, in this short article, we will get you acquainted with the taxation laws in South Africa surrounding gambling and lottery winnings.
Gambling and lotteries are a big thing in South Africa. If we talk particularly about online gambling, a great multitude of people indulge in it, either as pastime, or in the hopes of striking it rich someday. Well here’s some good news for you; any prize money that you win from the national lottery in South Africa will be considered as capital and you will not be taxed on it. Any such win will also be excluded from the capital gains tax. However, it’s important that whenever you win lotto prize money in South Africa, you proactively declare it to the SARS (South Africa Revenue Services).
Hence, any such prize money, no matter the amount, must be clearly stated in the tax return, mentioning that it should be treated as non-taxable gains for the pertinent taxation year. And that you are not bound to pay taxes on it.
Online casinos are perhaps the second most popular form of online gambling in South Africa that can win you a massive jackpot, and it’s not the first time someone has managed to cash out a huge sum. Hence, it is normal to ask, even in these scenarios, whether tax is applicable on these winnings. Well, in order to answer this question, we need to understand that there can be two potential scenarios:
- When the gambling activity is purely for pleasure or recreation. In such a case, the activity will be considered a hobby and not something you do with the idea of making a consistent profit from. Therefore, the winnings will be treated the same way as the lotto winnings and considered as capital, not subject to any capital gains tax or any tax in general. Regardless, it should still be declared. Almost 95% of gambling and casino winnings fall into this category.
- In the event that the gambling activity is carried out as a scheme, or done solely with the aim of registering some regular profit, you will no longer be able to consider it as capital and will be bound to pay tax on it to the South African government. This type of tax is applicable to the professional gamblers in the country.
Workplace related winnings
There could also be winnings directly related to your workplace, for instance, an amount won through some competition at work. The South African taxation laws have a special inclusion under the definition of gross income, clearly stating that any amount received for services provided, even if the concerned task is voluntary in nature, must be accounted under gross income, and paid tax on.
Hence, whenever employees get any remuneration related to their work, for instance, best employee prize, it must be considered gross income, and accounted for as remuneration given by the employer for the services. In case this prize isn’t in terms of cash, its value must be calculated and accounted for as gross income.
But if the awarded prize doesn’t have anything to do with work, for example, a lottery win at an old people’s home, magazine competitions etc., the money will be considered capital in nature and will not be taxed.