The short answer is no. Your online winnings are not taxable in Canada, unless you are a professional gambler living from your earnings. Even that is a roller-coaster ride when you consider big wins as profits and large losses as expenses to offset those profits.
Why Don’t Online Casino Players Pay Taxes On Their Winnings?
When you win playing online casino games, Canadian laws do not see these winnings as income to be taxed. This is because, in the eyes of the law, a player’s winning amount is due to luck, not an expectation. The origin of the tax law is a long-standing principle from British Common Law, codified in Canada under paragraph 40(2) (f) of the Income Tax Act. This has been upheld by the Canadian Courts, as long as the profits are not business-related. Three categories deal with taxation on gambling winnings:
- If a player makes enough to maintain his standard of living, it does not in itself make the amount taxable.
- No matter how much you enjoy online gambling, and how much attention you give it, it does not make it taxable.
- A system for minimization of risk can distinguish between a professional and an intemperate gambler. Once again, an intemperate gambler’s winnings are not taxable.
Canada does not licence online casinos, other than those issued licenses from the Kahnawake Gaming Commission (KGC). Playing and winning at a KGC online casino, or any other licenced online casino, means your winnings are your own.
There are many legit online casinos where you can play tax-free. For example, Quatro Casino is licensed under KGC and allows you to legally collect your winnings tax-free. However, this exemption does not apply if you are considered a professional players.
Big And Small Lottery Wins Exempt From Tax!
Yes, you have read that correctly; even a life-changing lottery win will not be taxed. So, you can play on any Canadian lottery like Lotto Max and enjoy the results of your wins. The reason behind this is that Canadian Law perceives a lottery win as a ‘windfall’ and exempt from taxation.
Be careful though, as some countries do impose a tax on lottery winnings, for example, the USA. If you choose to play on an American lottery via an online site, you could still be taxed 30% of your winnings by them!
What is taxable in Canada is interest from any winnings. Interest from any banked or saved winnings must be declared on a T5 form, and you could be fined for not doing so.
Can You Keep All Your Winnings When Playing In A Land-Based Casino?
Gambling became legal in 1972 and opened the door to land-based casinos in Canada. Seven out of the ten provinces allow gambling. Here, yet again, wins are not taxable. As long as you are not a professional Poker or Blackjack player and playing is not your main source of income, you get to keep it all.
Land-based casinos are licensed by the province in which they are situated. One such province is the Kahnawake National Reserve which is a Mohawk territory located within Quebec. The area operates land-based casinos and can regulate online casinos, Poker rooms and Sportsbooks.
A final word on gambling taxation is that if you receive a gift from a gambling win, this has to be declared, or you could face legal action. But, all your own winnings if not gained professionally or as your only source of income can be initially collected tax-free. Just remember interest on any such wins needs to be declared.