Do I Pay Taxes on Casino Winnings in South Africa: A Comprehensive Guide

Are South African Casinos Undertaxed?
Are South African Casinos Undertaxed?

Casino fans and gambling addicts are crucial ingredients in making huge ROI and profit margins for the casino industry around the world.

Most people don’t think about taxes when visiting a racetrack or casino, but what might seem like nothing more than the chance to win some extra money actually has some tax implications. As is often the case, federal and state governments single out casino winnings for unique taxes of their own.

Paying Tax On Casino Wins
Is Gambling legal in SA?

South African law allows online gambling to be offered by any operator with a licence issued by a provincial authority. However, the country does not have a full legislative framework, as the National Gambling Amendment Act of 2008 – intended to properly regulate the vertical – never came into force.

Do casinos deduct taxes?

Do casinos deduct taxes?
Do casinos deduct taxes?

In most cases, the casino takes 25 percent off your winnings for IRS gambling taxes before paying you.

Not all gambling winnings in the amounts above are subject to IRS Form W2-G. W2-G forms are not required for winnings from table games such as blackjack, craps, baccarat, and roulette, regardless of the amount.

What is the rate of gambling in SA?

What is the rate of gambling in SA?
What is the rate of gambling in SA?

The highest possible tax rate for casinos is for revenue of SAR100m or more, which is taxed at 14.05%. Previously, revenue less than SAR30m was taxed at 9.5% and revenue above this total at 12.5%

Paying Tax On Casino Wins

How much do you have to pay for winning?
How much do you have to pay for winning?

It’s important for you to know the capping that requires income reporting by the payer. Winnings in the following amounts must be reported to the IRS by the payer:

  • $600 or more at a horse track (if that is 300 times your bet)
  • $1,200 or more at a slot machine or bingo game
  • $1,500 or more in keno winnings (minus the amount you bet)
  • $5,000 or more in poker tournament winnings (minus the amount you bet or buy-in price)

All of these require giving the payer your Social Security number, as well as filling out IRS Form W2-G to report the full amount won. In most cases, the casino will take 25 percent off your winnings for IRS gambling taxes before paying you.

Not all gambling winnings in the amounts above are subject to IRS Form W2-G. W2-G forms are not needed for winnings from table games such as blackjack, craps, baccarat, and roulette, regardless of the amount.

Note that this does not mean you are exempted from paying taxes or reporting the winnings on your taxes. Any and all gambling winnings must be reported to the IRS. It only means that you do not have to fill out Form W2-G for these particular table-based games.

What About State Taxes?

What About State Taxes?
What About State Taxes?

In addition to federal taxes payable to the IRS, several state governments tax gambling income as well. Each state has its own specific formulas and rules for gambling income, and some levy no gambling taxes at all. Some states charge a flat percentage, while others base the state tax on how much you won.

Do I have to Report Small Winnings and/or Scratch Cards?

Usually, any income from gambling is taxable income – if you purchase a scratch card for $5 and win $20, the $15 should be reported on your taxes as income.

Gambling Losses

You may deduct gambling losses if you itemize your deductions. You can deduct your losses only up to the number of your total gambling winnings. You must generally report your winnings and losses separately, rather than reporting a net amount.

Gambling losses are deducted on Schedule A as a miscellaneous deduction and are not subject to a 2% limit. This means that you can deduct all losses up to the number of your winnings, not just the amount over 2% of your adjusted gross income. When you prepare and e-File your return on eFile.com, the eFile app will automatically generate your eFileIT Schedule A and add it to your return based on the deduction information you enter.

Facts about Gambling in SA

Facts about Gambling in SA
Facts about Gambling in SA

In South Africa, one in 10 citizens engages in gambling as a form of entertainment. Furthermore, current estimates put the annual gross revenue of the country’s gambling industry to be around R35 billion. Going forward, experts have forecast that this will increase by 6% annually.

Research shows that problem gamblers account for between 30% and 40% of total gambling revenue in the United States and Canada. Slot machine revenue accounts for up to 60%.

With this in mind, casino operators are taking advantage in a discreet way, especially with the absence of rigid regulation and enforcement in the industry. Operators are playing it safe whenever the issue of problem gambling emerges. They are quick to mention the funding of the National Responsible Gambling Foundation (NRGF), which receives 0.1% of its gross gaming revenue.

This funding initiative is their passive solution to attend to problem gambling issues. But is this funding enough?

Are These Funds Put into Good Use?

Are These Funds Put into Good Use?
Are These Funds Put into Good Use?

The National Responsible Gambling Foundation received R23.3 million in 2014. It has earned commendations for its treatment and rehabilitation programme. The only lingering issue is that while its programme is aimed to help problem gamblers, its counsellors are limited to only those who are actively seeking help. Nevertheless, operators have declared significant economic contributions that have helped increase South Africa’s GDP percentage and employment rate.

A National Gambling Board study found that the gambling sector directly added R11-billion to GDP in 2012, with an indirect GDP contribution of R21.9-billion. NGB’s findings also estimated that the local casino industry created over 30,000 jobs. It also has indirectly made over 100,000 jobs with the assumption that every gambling job sustains 4.6 jobs in other industries. A simple example is that land-based casinos are operating online, and would need web development and digital marketing professionals for such operations.

So Are Local Operators Undertaxed?

So Are Local Operators Undertaxed?
So Are Local Operators Undertaxed?

It’s surprising that the decent figures mentioned earlier don’t account for gamblers’ losses.  The losses are actually lower considering that a PwC report that says South Africans bled R17.2-billion in casinos in 2014 (an average of R314 for every citizen). Industry pundits think that major casinos’ patrons are actually the low earners that lose an average of nearly R3,000 a month.

The estimates don’t really factor in the spending that could move to other sectors if ever the government strictly regulated the local casino industry. Casinos paid 21.4% in taxes, or R3.7-billion, on the R17.2 billion they took from gamblers, plus a portion of the 28% corporate tax paid by the holding company in 2014.

Facts and figures

These may really seem a decent set of figures for the casino industry in South Africa; after all, it also has increased the GDP and made industry-related jobs. However, Peter Collins, former executive director of the NRGF, says local casinos are undertaxed which is the cause of South Africa’s poverty crisis. “Gambling tax is 39% in Macau. In Berlin, it’s 92%. If you tell the Germans they’d get more tax if the rate was lower and more gambling happened, they’ll say that’s exactly what they don’t want.”

Collins’ statements might be factual to a certain extent. But the issue of local casinos being undertaxed is more of a confidential rather than a mere PR embellishment for casino operators. Do we really think these casino operators are revealing actual figures? Expect more studies and debates as South Africa’s gambling industry grows.

Synopsis

These are some of the facts about gambling in SA and if the local casino operators are undertaxed. Hope you would have a good idea about the taxing system of SA and other related information.

FAQs

1. Do casinos track your winnings?

But casinos of course track the win/loss information, amount bet, etc., for various purposes. One is of course to calculate your offers, but another is to spot players who might be worth approaching. 

2. Which is the biggest casino in South Africa?

The GrandWest is the biggest land-based casino in South Africa, just eating Time Square Casino. In Cape Town, the GrandWest has a staggering 2,562 smart card slots, meaning you don’t need cash here. With 80 gaming tables too, this casino has it all.

3. How much do casino owners make in South Africa?

In South Africa, the average annual salary for a Casino Dealer is ZAR 153,552 and the hourly wage is ZAR 74. A Casino Dealer’s average income ranges from ZAR 116,546 and ZAR 178,888.

4. How can I avoid paying taxes on casino winnings?

Any money you win while gambling or wagering is considered taxable income by the IRS as is the fair market value of any item you win. This means there is no way to avoid paying taxes on gambling winnings.

A gambling game is legal if it has been authorized in terms of the National Gambling Act 7 of 2004 (the Act) and respective provincial legislation.

About the author

Mac Ocampo