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 tax, among others, prizes paid corresponding to lotteries and bets organized by the State Lottery and Betting Society (SELAE).

The aforementioned rule 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 agency paying the prize, that is, the SELAE.

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

Prizes whose full amount is equal to or less than 40,000 euros will be exempt. Prizes whose full amount exceeds 40,000 euros will only be taxed on the part of the prize that exceeds said amount.

The base of the withholding of the special tax will be formed by the amount of the prize that exceeds the exempt amount. The withholding or deposit percentage on account 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.

The SELAE must proceed to identify the winners of the prizes subject to tax, that is, those that are greater than €40,000 per tenth, regardless of whether the prize has been obtained by one person or jointly by several people or entities.

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

Income tax taxpayers 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.