FTA publishes withholding tax treatment of profits from the Money Gaming Act

The Federal Act of 29 September 2017 on Money Games (Money Games Act, OGG; SR 935.51) entered into force on 1 January 2019. It replaces the previous laws on casinos and lotteries. The amendments to the Federal Act of 13 October 1965 on Withholding Tax (Withholding Tax Act, VStG; SR 642.21) on the reporting procedure for winnings in kind (cf. in particular Art. 20a VStG) entered into force on 5 February 2019 with retroactive effect from 1 January 2019 (AS 2019 433).

The BGS defines - indirectly - which profits are subject to withholding tax in the sense of the BGS.

Taxable profits as defined by the BGS

For the purposes of withholding tax, only winnings from money games as defined by the BGS and winnings from lotteries and games of skill for sales promotion purposes are taxable (cf. Art. 1 para. 1 VStG). Winnings from foreign games of chance are therefore not subject to withholding tax.

Based on the general definitions of the BGS (cf. Art. 3 BGS), the taxability of profits in the sense of the BGS and their different links can be used as a basis for the issues of withholding tax. In the following, the individual types of profits are briefly described and reference is made to the consequences under withholding tax law:

• Money games (Art. 3 a BGS): Games in which there is the prospect of a monetary gain or other monetary advantage in exchange for a monetary stake or the conclusion of a legal transaction.
  
  Among other things, the Federal Government levies a withholding tax on winnings from money games within the meaning of the BGS and on winnings from lotteries and games of skill for sales promotion purposes that are not subject to the BGS (cf. Art. 1 VStG).

• Casino games (art. 3 let. g FOPI): Money games open to a very limited number of persons; sports betting, games of skill and small games (examples: table games in casinos with a licence, large poker tournaments).
  
  Profits made in Swiss casinos are tax-free. However, winnings from online participation in casino games are subject to withholding tax from CHF 1 million (tax-free amount, i.e. corresponding winnings are subject to withholding tax only from CHF 1,000,001; cf. Art. 6 para. 1 VStG in conjunction with Art. 24 let. i and ibis DBG). In the case of cash winnings, the withholding tax of 35% must be declared by the organiser, unsolicited and unchanged, on official form 121 and submitted to the Federal Tax Administration (FTA). In the event of a profit in kind of more than CHF 1 million, the organiser must submit a declaration using the newly created official form 122 within 90 days of the due date of the profit (cf. Art. 22a VStG).

• Large-scale games (art. 3 let. e FGS): games conducted automatically or online or intercantonal (examples: lotteries conducted by Swisslos or Loterie Romande, games of skill and sports betting)
  
  According to the new provisions, the winnings from these financial games remain taxable for the purposes of withholding tax under the new law. However, the tax-free amount for withholding tax increases from CHF 1,000 to CHF 1 million (i.e. corresponding winnings are only subject to withholding tax from CHF 1,000,001 onwards).

• Small games (Art. 3 let. f FGS): money games that are not automated, not carried out online and not intercantonal (examples: small lotteries such as tombolas, local sports betting or small poker tournaments).
  
  Profits made in connection with this type of financial game are not subject to withholding tax, provided that these financial games have been approved by the cantonal supervisory and enforcement authorities (cf. Art. 6 para. 1 VStG in conjunction with Art. 24 Bst. iter DBG in conjunction with Art. 32 FOPI).

• Lotteries and games of skill for sales promotion (Art. 3 let. b and d BGS): Not subject to the BGS. However, their winnings may become subject to withholding tax by virtue of an express provision in Article 1 paragraph 1 of the VAT Act (examples: competitions with cash or non-cash winnings).
  
  Winnings from a lottery organised by a media company or a game of skill for sales promotion purposes (for example, to attract new subscribers) are subject to withholding tax if the tax-free threshold of CHF 1,000 is exceeded. This applies regardless of whether participation is paid or free of charge. This means that a profit of CHF 1,000 is not subject to withholding tax, while a profit of CHF 1,001 is fully taxable.
  
  Prizes won in a lottery or a game of skill for sales promotion purposes, where participation is exclusively by way of the purchase of goods or services offered at prices not exceeding market rates, are also subject to withholding tax, provided that the tax-free threshold of CHF 1,000 is exceeded and the organiser is not a media company or a media company for third parties (e.g. a competition organised in a print medium that is not submitted free of charge, with the prize being an overnight stay in a hotel). If, on the other hand, it is possible to participate free of charge in a lottery or a game of skill to promote sales of a media company not organising for itself, the corresponding winnings are not subject to withholding tax (cf. Art. 6 para. 2 VStG in conjunction with Art. 24 let. j DBG).
  
  Cash profits subject to withholding tax must still be declared using official form 121 (QDF, 67 kB, 07.08.2018), whereas in the case of profits in kind the reporting procedure using official form 122 (QDF, 65 kB, 06.02.2019) must be applied.

Additional remarks

• Winnings from illegal or unauthorised games are also subject to withholding tax.
• Profits in the form of vouchers are treated as profits in kind.
• For gains in kind subject to withholding tax, Article 20a paragraph 2 VStG stipulates that a valid certificate of residence of the winner must be attached to the official form 122 concerning the reporting procedure in order to correctly inform the cantonal tax authorities of the canton of residence.

The attached diagram shows the withholding tax treatment of the various profits in terms of the BGS. Questions in connection with the levying or reporting of withholding tax can be sent to the FTA at the following e-mail address: lotterien@estv.admin.ch. Questions relating to income tax (both direct federal tax and state and municipal taxes) should be addressed to the competent cantonal tax authorities.

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