EUFA Lottery Winnings
The European Commission has recently referred Portugal to the European Court of Justice over its controversial tax rules regarding foreign lottery winnings. The European Union considers these rules contrary to the EC Treaty and the EEA Agreement, as they restrict freedom of provision of services. This case is likely to have ramifications for lottery players around the world.
The amount of tax a player must pay depends on their country of residence. People living in Switzerland and Portugal are tax-free. Those living in Spain, however, must pay a substantial amount of tax on their prize money. For those living in the latter country, the tax rate is up to 35 percent.
In addition to determining whether their winnings are taxable, lottery winners must also keep all of their receipts. This is because, if a lump sum lottery prize exceeds a certain threshold, it will bump the winner into the highest tax bracket. In 2020, that means the winner would pay taxes on 37% of their income.
Are EUFA Lottery Winnings Taxable?
In the United States, lottery winnings are taxed according to federal tax brackets, and different parts are taxed at different rates. The federal rate is 37 percent, while state and local taxes vary by location. Some states do not have income taxes, and others withhold up to 15 percent of taxable amounts. Some states also have different rates for non-residents.
For those who are claiming a prize through a lottery pool, it is important to document how they’ll split the prize. Depending on who shares the prize, the amount may be subject to tax on the entire prize. In addition, it may be necessary to pay estimated tax payments or pay penalties if you’re not able to make your tax payments on time.
If you’re a resident of the UK, the winnings from a lottery are exempt from tax in the UK. However, winnings from a lottery in another country may be taxed. In the UK, lottery winnings are exempt from inheritance tax.
Another way to protect your lottery winnings is to choose an annuity payment plan. These annuity payments can put you in a lower tax bracket than you’d be otherwise. As an example, if you won $73,333 in a lottery, the taxable amount would be $11,992 in the year of winning.