Act 16/2012 of 27 December governing tax measures for the consolidation of public finances and the promotion of economic activity, renders taxable by special taxation, among other things, prizes paid out in winnings on State organised Lotteries (SELAE).
The aforementioned regulation establishes that prize recipients, whatever their nature, upon collecting the prize, shall be subject to a withholding or payment on account made by the entity awarding the prize, i.e. SELAE.
Independently, each winning lottery ticket - one tenth, fraction or coupon - shall be required. Prizes of 2,500 euros or less shall be exempt. Prizes of over 2,500 euros shall only be taxable on the portion exceeding this amount.
The base of the special withholding tax shall be equivalent to the part of the winnings which exceeds the exemption allowance. The percentage of withholding or payment on account is 20%.
For example, a prize of €100,000 would be taxed at 20% on €97,500 (100,000 - 2,500). A withholding of €19,500 will be applied and €80,500 will be received.
The SELAE should identify the taxable prizewinners, i.e. those with winnings of 2,500 euros or more, regardless of whether the prize was won individually or in syndicate with other persons or entities.
In the case of shared prizes (groups of friends, clubs, syndicates...), in which the prize is shared between all the participants, the exempt €2,500 shall be distributed among all the beneficiaries in proportion of their participation, and the individual distributing the winnings and recorded as sole beneficiary (or collection manager) upon collecting the prize, must be able to provide proof to the Tax Agency that the prize has been distributed to the syndicate members, and therefore it is necessary to identify each winner and their percentage participation in the winnings.
Personal Income Taxpayers or non-resident taxpayers without a permanent establishment who have won a lottery prize and been subject to a withholding upon receipt of the prize, will not have to present any self-assessment tax return.
Furthermore, non-resident taxpayers without a permanent establishment who have won a lottery prize and been subject to a withholding upon receipt of the prize, may request a tax refund which they may be entitled to in accordance with an international double taxation agreement.
As was the case before 1 January 2013, Corporation Taxpayers with winnings subject to special taxation must include the amount of the prize in the taxable income for the period and the withholding/deposit in account shall be 20%, recorded as an ordinary payment on account.