The taxation of lottery winnings

Almost everyone dreams of winning big in the lottery once in their life, but only for a few does this dream come true. Those who are among the few lucky winners must soon deal with the question of how to tax the lottery win.

Most people dream of winning big in the lottery. A dream realized by only a few people. Those who do belong to the lucky winners probably first wonder what they want to buy first with the windfall. Once the initial exhilaration has faded, the question soon arises as to what the taxation of lottery winnings looks like.

Varying taxation by canton

The taxation of lottery winnings is a complex issue, as it depends on the type of game, the amount of the stake, and the winner's canton of residence. It is important to distinguish between lotteries and skill games. While in lotteries, chance alone determines the winner, players can influence the outcome of the game through their skills in skill games. In both cases, winnings are generally taxable. Exempt from taxation are Swiss casinos (excluding online casinos) and so-called small games like local lotteries, local sports betting, or small poker tournaments. Depending on the canton, winnings are subject to ordinary income tax or a special tax. The specific taxation varies strongly from canton to canton, which is why lottery winners often change their residence before the end of the year.

Organizer must pay withholding tax

The organizer of a lottery is obliged to pay the applicable tax authorities a withholding tax of 35 percent. Excluded from taxation, in addition to winnings from small games, since January 1, 2019, are also winnings up to one million francs from major games. Any amount above this must be taxed. For example, someone who wins 10 million in a lottery receives only 6.85 million directly paid out. The remaining 3.15 million initially goes to the treasury. This process ensures that the lucky winner declares their win in the tax declaration, thus enabling the actual taxation. If the conditions are met, the winner can reclaim the withholding tax from the authorities. To do this, they must correctly declare their winnings in the tax declaration and prove ownership of the winning ticket at the time of the draw.

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