Paying Tax on Poker Winnings II

Paying tax on poker winningsHere’s Part Two of an article on poker and taxation from the team at bet365 poker. In Part One they covered Paying tax on Poker Winnings for Americans and Canadians.

Poker Winnings and Taxes Part II: International Players
Disclaimer: The following is for informational purposes only. A tax professional should be consulted for official advice.

With the top two WSOP Main Event winners were from Denmark and Russia there have been a lot of discussions about how taxation works for international poker players who win big in an American poker tournament.

Although taxes are always a messy topic since so much is dependent on each individual’s situation, we have undertaken to shed a little light on the topic of poker winnings and taxes for international players.

Countries with Tax Treaties

The international poker community is broken into two groups in the eyes of the IRS. The first are those with which the United States has a Tax Treaty. This list includes: Austria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, Russian Federation, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom.

If you are a resident of any of these countries then you get to avoid the 30% withholding tax but will still be subject to your own country’s taxation. In order to prevent the cash cage from keeping 30% on behalf of the U.S. government residents of the above countries you will need to fill out and hand in the IRS form W-8BEN and that will also require a valid Individual Taxpayer Identification Number (ITIN number).

To get an ITIN you will first have to need one, which means that you can’t apply for it until you actually have a tax return to claim by winning something. So if you cash in an American poker tournament like the WSOP, you can apply for an ITIN in January of the following year. Then, once you have the ITIN, you can apply to get your 30% back from the Rio Hotel and Casino.

Find out more about the ITIN and how to apply for it at the IRS website.

Countries without Tax Treaties

This is a tough place to be. A poker player from somewhere like Kazakhstan will not only be subject to the United States’ 30% withholding tax, but also to the taxes of Kazakhstan itself (whatever those might be). The good news is that many countries will compensate the poker player with a credit for the 30%.

The Best and the Worst Places to Live

Based on the payouts from the 2008 WSOP Final Table, two countries pop out as being on either end of the poker taxation spectrum and they come from the top two finishers.

Peter Eastgate of Denmark who won $9.1 million will be subjected to a mind boggling 45% hit on his first $4 million and 75% on the rest of his winnings. This leaves him with around $2.5 million, even less than what second place Ivan Demidov will end up keeping. Demidov of Russia won $5,809,595 and will only be taxed 13% which means he’ll end up keeping $5,809,595 — $755,247 Russian tax (13.0% rate) $5,054,348!

Eastgate allegedly tried to become a resident of the United Kingdom during the months leading up to the final table so as to avoid Denmark’s brutal taxes, but experts have said that this is not likely to be accepted by the Danish government as a way to avoid the tax.

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1 Comment so far
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Great work Mike !!

Possibly the only time I’ve found talking about TAXES interesting !!
Well done.

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