Law 16/2012, of December 27, which adopts various tax measures aimed at consolidating public finances and promoting economic activity, subjects to taxation, through a special levy, among others, the prizes paid for lotteries and bets organized by the State Lottery and Betting Company (SELAE).

The aforementioned regulation establishes that the recipients of these prizes, whatever their nature, at the time of collection, will bear a withholding or payment on account that must be made by the prize-paying agency, that is, the SELAE.

Independently, each winning lottery ticket - one tenth, fraction or coupon - shall be required.

Prizes with a total value of 40,000 euros or less will be exempt. Prizes whose total amount exceeds 40,000 euros will only be taxed on the part of the prize that exceeds this amount.

The basis for withholding the special tax will be the amount of the prize that exceeds the exempt amount. The retention or payment on account percentage will be 20 percent.

Thus, for example, a prize of €100,000 would be taxed at 20% on €60,000 (€100,000 - €40,000), so a withholding of €12,000 would be made and €88,000 would be received.

SELAE must proceed to identify the winners of the prizes subject to tax, that is, those that are greater than €40,000 per ticket, regardless of whether the prize was won by one person alone or jointly by several people or entities.

In the case of shared prizes (group of friends or relatives, clubs, brotherhoods, etc.), in which the prize is distributed among all participants, the €40,000 that are exempt must be distributed among all beneficiaries in proportion to their percentage of participation, and whoever distributes the prize and who appears as the sole beneficiary (or as the collection manager) for having stated so at the time of collection of the prize, must be able to prove to the Tax Administration that the prize has been distributed to the holders of shares, therefore it is necessary to identify each winner as well as their percentage of participation.

Income tax payers or non-resident taxpayers without a permanent establishment who are successful and have borne the withholding at the time of payment of the prize will not have to submit any other self-assessment.

Furthermore, non-resident taxpayers without a permanent establishment who have won a lottery prize and been subject to a withholding upon receipt of the prize, may request a tax refund which they may be entitled to in accordance with an international double taxation agreement.

As was the case before 1 January 2013, Corporation Taxpayers with winnings subject to special taxation must include the amount of the prize in the taxable income for the period and the withholding/deposit in account shall be 20%, recorded as an ordinary payment on account.