Chilean Authority Warns Online Gambling Winnings Are Taxable

March 30, 2023
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After denying allegedly illegal offshore operators the ability to pay digital VAT, Chile’s tax authority has reminded Chileans that they must still declare additional income from online gambling winnings.

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After denying allegedly illegal offshore operators the ability to pay digital VAT, Chile’s tax authority has reminded Chileans that they must still declare additional income from online gambling winnings.

The warning regarding income taxes due on offshore gambling winnings from Chile's equivalent of the Internal Revenue Service, the SII, comes just one week after tax officials said they had been informed by the Chilean Casino Gaming Superintendence (SCJ) that online gambling platforms are illegal, and as such the operators will not be able to pay digital Value Added Tax (VAT) on their activities in the country.

That was a 180-degree turn for the organisation, as just last summer, the SII worked to ensure that online gambling platforms based abroad were in fact paying the VAT they owed despite being based offshore.

On Tuesday (March 28), the SII said that as of April 1 Chileans who do not declare their digital gambling income will be liable for tax investigation.

Online gambling is not regulated in Chile, but the government and lawmakers are embroiled in a long process of evaluating an online gambling regulation bill that was first submitted for congressional approval in March 2022.

That bill is currently pending in the Chamber of Deputies' Economy Commission, where online operators, Chilean public lotteries and incumbent land-based casinos are all lobbying for a final text that favours their interests.

Carolina Saravia, the deputy director of inspection at the SII, clarified that online gambling income is classified as a sporadic increase in assets.

“In the specific case of people who may have obtained an increase in their assets, therefore an income, the product of the bets on these online platforms should be declared the minute they obtained it … as sporadic income, with a rate of 25 percent,” she warned.

That standard 25 percent rate is higher than the proposed online gambling winnings tax rate of 15 percent that is proposed in the current draft of the online gambling bill.

Hernán Frigolett, the head of the agency, said that although the SII does not currently know who earns money from offshore gambling, tax officials do have access to information on who placed bets.

“We control the provenance of investments, therefore if they made investments with this income, we are going to be able to detect them and we are going to call them to the inspection process in case they have not incorporated that information,” he said.

Carlos Baeza, a Chilean gambling lawyer who represents various online operators including Coolbet, Latamwin and Betsson, said that requiring a declaration of additional income from foreign entities is not a new rule, but the reminder from the SII is a political move in the ongoing online gambling lobbying fight.

“All income received from prizes, in the case of online betting platforms, fall under the general income regime and are taxed by what is called the global complementary tax, which is a progressive tax ranging from 5 to 42 percent, depending on the amount of income.

“That is the rule that applies. There is no 25 percent rate and it does not exist as a rate, nor as a maximum, nor as anything else,” he told VIXIO GamblingCompliance.

The only tax that specifically applies to gambling winnings is the one that is established for the state lottery duopoly of Lotería de Concepción and Polla Chilena de Beneficencia. The tax rate on winnings from those public lottery organisation is 15 percent, which Baeza says is probably the reference point for the tax that is established in the online gambling bill.

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