Lottery Prizes - What About Tax?

The Holiday Season will be upon us shortly and many will no doubt partake in the Spanish costume of trying your luck with the many lotteries that will be selling tickets for drawings around Christmas, New Year and Three Kings.

But what if you win a substantial prize – what part is the Tax Man entitled to?

To determine that, you need to differentiate between the few state or region-regulated lotteries, and all others. As there is a special system in place for those belonging to the first group.

The draws that take advantage of this special system are:

• The prizes of the lotteries and bets organized by the State Lotteries and State Betting Society.
• Lotteries created by bodies or entities of the Autonomous Communities.
• The draws organized by the Spanish Red Cross and
• The modalities of games authorized to the ONCE (National Organization of the Spanish Blind.)

Allowances under the special system:

• Prizes won during 2019: 20.000 euros
• Prizes won during 2020: 40.000 euros

If the prize you win is of a higher value, the organising organisation will deduct 20% tax over the exceeding amount and pay you netto.

E.g. you win a prize of 30.000 euros in the Christmas Lottery of December 2019. You will be paid 28.000 euros. 20.000 tax free and 20% of 10.000 paid to the Tax Office, resulting in 28.000 to be paid into your account.

On all other lottery, raffle etc. prizes you need to pay 19% tax, through your RENTA tax declaration where you need to include the value under ‘ganancia patrimonial’. No allowances.

Note from CAB: if you are in receipt of any kind of income-tested ‘subsidios’ or are entitled to any kind of IRPF reductions, please make sure that accepting and declaring a small prize doesn’t have far more serious financial consequences. In some cases, it could be better to refuse the prize, then to accept and having to declare.

Please note: The information provided is based upon our understanding of current legislation. It is not legal advice but is provided freely to enable you to be properly informed. We recommend that if you are considering taking action, you should seek professional advice.