In Canada, the laws pertaining to the ownership of online casinos are quite strict. Namely, only the government is allowed to own an online casino that has its headquarters within Canadian borders. For others, though, it is illegal. Nevertheless, a way to bypass these laws has been found. Many online casino owners from this country decided to operate from other jurisdictions where online gambling is legal. From there, they offer their services to Canadian players.
The laws pertaining to the players themselves, on the other hand, are rather relaxed. In fact, gamblers from Canada are allowed to play in any online casino they like, regardless of its location. Also, you will not be required to pay any taxes for your winnings most of the time, unlike in the US, where all winnings of $1200 or more are subject to a 30% tax.
There are some situations in which winnings have to be taxed, though, and they will be discussed in this article.
Do I Need to Pay Taxes on My Winnings?
Most Canadian gamblers are not expected to pay any income tax on their winnings, since these prizes are not really considered to be a viable source of income. The government simply does not see this kind of taxing as just or fair, as the majority of Canadian players do not make a living this way and gambling is not their career.
Nevertheless, there are gambling professionals who earn most of their money from games of chance, which is why they are expected to pay taxes on their prizes. For example, everyone who runs a gambling business needs to declare their profit from it on a tax form. Moreover, according to the Canadian Income Tax Act, a person is seen as a professional gambler if gambling is their exclusive source of income, or if he/she uses a specific set of skills to make a long-term profit. This is why poker players are more likely to be seen as professionals than others, as poker relies on skills just as much as it relies on luck, if not more.
As a result, those players who do not fit any of these criteria are seen as non-professionals, regardless of how much time they spend playing or how much money they make while gambling. Even if someone is an avid gambler, they will not be seen as a pro, unless they make their living doing this exclusively.
This law pertains to all the popular casino games, such as slots, blackjack, poker, and roulette, among others, and it is used to govern both online and offline forms of gambling.
How Should Professionals Calculate Their Taxes?
Professional gamblers are considered to be running their own freelance business, which is why they need to file taxes on their prize money. The winnings are taxed just like any other kind of income, while all the losses are seen as expenses and are, thus, deductible.
However, bear in mind that in each of the ten provinces and three territories, there are different income tax rates, which is why you have to be careful when filing your taxes.
For example, in Quebec, tax rates are higher than anywhere else in Canada, which is why the first C$43,790 of taxable income is subject to a 15% tax in this province. For the next C$43,785, an additional 20% tax is applied. The tax rate for the next C$18,980 is 24%, and for any taxable income of C$106,555 or more, a 25.75% tax will have to be paid.
On the other hand, you will find the lowest income tax in Nunavut, where 4% is paid on the first C$45,414, 7% on the next C$45,415, and 9% on the following C$56,838. Every amount of C$147,667 will be subject to 11.5% tax.
Remember, these rules only apply to professional gamblers, as defined in the previous paragraph. Non-professional players are exempt from paying taxes for their prizes and winnings.
Are the Laws the Same in Every Part of Canada?
Canadian provinces and territories are considered to be self-governing entities. That is why each of them has been allowed to pass its own acts regarding gambling. Basically, your location in Canada determines what kind of gambling you will be allowed to participate in legally and how old you have to be in order to take part in these activities.
However, in each of the provinces, you will be seen as a professional if you fulfill the criteria mentioned above. Also, even though tax rates differ from province to province, the fact that you have to pay taxes if you are a professional player remains.
In Canada, online gamblers who make a living playing games of chance are perceived as professionals, which is why their winnings are seen as income and are, therefore, taxable. The tax rates will depend on the players’ location, as they differ in each of the provinces and territories. However, those who have another job or career will not be considered professionals and will not be expected to pay anything.
Still, this information is subject to change. If there are any doubts, make sure to contact an accountant or a tax lawyer, as they could provide more details regarding taxes and online casino winnings for each of the provinces and territories in Canada.