Your winnings in the lottery, regardless of whether you are playing local lotteries from the Philippines or adventuring in international games that pay millions, are subject to taxes. However, the lottery tax rules vary according to the amount, and you need to?know the exact share you should deduct and pay the government. Join us to figure out how much you will still have left.
How Much Tax Is Deducted From Lottery Winnings in the Philippines?
According to the?Republic Act No. 10963, the Tax Reform for Acceleration and Inclusion Law (TRAIN) law,?all lottery winnings above ?10,000 are subject to a lottery tax of 20%. Therefore, if you win ?9,000, there is nothing to share with the government. On the other hand, ?10,0001 is already enough to have 20% withheld from your winnings.
That rule applies to PSCO and Lotto winnings as well, leaving?no one exempt from paying taxes?if the prize is above the minimum threshold.?Age, occupation, and any other parameter cannot affect?that obligation under the lottery tax law.
Lottery Tax Legislation: the New TRAIN Law
The TRAIN law is recent and only implemented in 2018. For people who are used to?playing online lottery, it may seem that the rules of the game have never changed. However,?players of the local Lotto games used to be exempt?from taxes, as our table shows:
| Old NIRC (National Internal Revenue Code) | Current TRAIN |
|---|---|
|
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In summary, now?everyone is subject to the same 20% on prizes above ?10,000, even when you choose our local Lotto. Just for the sake of having a practical example, imagine you have won ?150,000 in 2017 by playing the PSCO Lotto. There used to be no final tax, and you were given all that amount.
Now, if you win the same ?150,000 prize, you need to consider the following deduction:
- Prize:??150,000
- Final Tax:??30,000
- Net Winnings:??120,000
While that may not seem like a lot if we consider a small prize,?having ?1,000,000 deducted from a ?5,000,000 prize?the same way a ?20,000 winner loses ?4,000 can be frustrating.
Choosing lottery games from abroad because of their better prizes, like Powerball and Mega Millions, can be a great choice but not due to taxes. Keep in mind that,?whenever you play a lottery from abroad, you are subject not only to our lottery tax?in the Philippines but also their local taxes, automatically withheld from the prize.
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The Future and Possible Lottery Tax Alterations
The TRAIN law went through several discussions, including?an attempt to maintain the exemption?of PSCO and Lotto winnings, which did not have any effect. The most probable future scenario is the maintenance of the current rules and the tax rate, which is not far from what other countries collect from local lottery winnings.
Can You Avoid Lottery Taxes in the Philippines?
There is?no resource to escape lottery taxes in the Philippines?if you are a resident or if you accrued lottery winnings from local games. Fortunately, you already receive the total amount net of taxes, as they are automatically withheld from the payment. Remember that those taxes are directed to social programs in fields of education and health, for example.
FAQs
You do not need to do anything because you have already collected your prize net of taxes if you are in the taxable range. If you win a lottery abroad, you need to pay that tax together with your income tax.
There is no escape from local lottery taxes, but failing to pay those from abroad can result in paying fines that will collect an even bigger part of your lottery winnings.
Yes, the 20% lottery tax applies to all lotteries if you are a resident of the Philippines. Therefore, make sure to collect it as a regular tax if you win a prize from abroad.
Playing online brings us comfort and flexibility, but the rules are the exact same. When you play online, you cannot avoid lottery taxes in the same way.
