Country of income?

[void]

Please help me understand how it works here...
Slovak citizen and tax resident. Living the whole year in Slovakia.
Registered on various online sportsbook sites licenced in Britain or Malta using his British address (supported by real proof of address) and making money using automated software from server located in Britain - no manual betting or logins from Slovakia.

Does such a person have a foreign income? Which is the deciding factor?

Let's put aside if the income is tax free or not in this particular case - which country is "entitled" to tax this income if the double taxation treaty between these countries doesn't mention this kind of income?

 

[Sols]

Unless you hold one of a handful of very unfortunate citizenships, you are taxed where you live, which sounds like it would be Slovakia. I don't see how UK would have any claim on this since you don't live there, although you may have made a bit of a mess for yourself if you for some reason are audited by the UK and they learn that the gambling accounts are registered under UK addresses.

If your income isn't defined in the double taxation treaty, you are subject to double taxation. Get a lawyer to help you sort out this mess before it's too late. Gambling winnings usually fall under income taxable under personal taxation or, in many cases, are entirely exempt from taxation.

I've heard of server location being used as an argument in court cases when it's come to corporate tax and determining tax residence. AFAIK, there are no general guidelines on that and you're at the mercy of the tax authority and, if you dispute that, the courts.

 

[KJK]

- The sportsbook believes you're an UK resident and your UK-sportsbook income should be qualified as "local" income for the HMRC
- HMRC probably doesn't even know about you
- Slovakia considers you resident but probably doesn't know about your sportsbook activities

This is nice because you will make everyone very confused. Of course not ideal, ideal situation for you would be to leave Slovakia.

In the worst case, if you get into some trouble, you will probably be considered Slovak resident with UK/Maltese foreign income (which is not excluded from tax). DTA would apply if UK would claim you as a resident, however they probably will not.

 

[void]

It's not about me personally but it's not important.
Sportsbooks don't care about one's tax residency - they purely allow betting of individuals able to provide a proof of their address in supported country which is something completely different. They always state it's your responsibility to take care about your taxes and don't care.
Considering this kind of winnings is tax free in UK, Malta and Slovakia too I think it's totally safe no matter how the situation is decided.

However I'm still a bit confused if it's a foreign income or not...
If it is and the DTA doesn't specifically mention this kind of income (well no one ever thinks about gamblers....) then there is typically a "default" saying it's taxable in the country where the individual is a tax resident no matter where the income is coming from.

 

[Gediminas]

If UK because of the server doesn't end up a fixed place of business, the taxes are only in Slovakia. If UK ends up - you pay there. In any case, if you are a Slovakian tax resident, you have to declare it. The solution would be to create some kind of intermediate structure, where you do not appear. Or change the tax residency.

 

[KJK]

The DTA does not apply, because you/that person/whoever are not an UK resident. You simply live in SK and are resident in SK.

If gambling winnings are tax-free then this type of income is foreign tax-free income. Likely you don't need to worry and maximum you can do is to declare it.

 

[Sols]

If it is and the DTA doesn't specifically mention this kind of income (well no one ever thinks about gamblers....) then there is typically a "default" saying it's taxable in the country where the individual is a tax resident no matter where the income is coming from.

It's all moot since there is no tax on gambling winnings across the EU.

But generally speaking, DTAs list which types of tax are covered. You will have to check Slovakia's tax law to determine where gambling winnings fall. If gambling winnings are exempt from tax (which is the norm across EU), then a DTA is irrelevant.

You are making this all incredibly complicated for no reason.

 

[thegame]

Don't understant how this will work. Obviously you are breaking the law if you bet via your own account from slovakia so you are using 3rd party account in uk to bypass this. But, money are won via your friends account and not yours, it is not foreign income won from you but from your friend's account. Gambling profits are tax free in uk but you can't declare those profits as they were not won with your personal account. You may invoice your friend for your services (if it is not illegal to use a 3rd party account) but you will have to pay tax for your services.

 

[void]

It's all moot since there is no tax on gambling winnings across the EU.

1) Not true - there are countries in EU that tax gambling profits - as far as I know France, Spain, Latvia, Estonia, Czech republic
2) This can and will change (only one possible direction...)
3) If foreign income (despite it's tax free) must be declared you're (sometimes) inconveniently sharing sensitive information with your tax office which wouldn't be the case if the income is considered local.

Don't understant how this will work. Obviously you are breaking the law if you bet via your own account from slovakia so you are using 3rd party account in uk to bypass this. But, money are won via your friends account and not yours, it is not foreign income won from you but from your friend's account. Gambling profits are tax free in uk but you can't declare those profits as they were not won with your personal account. You may invoice your friend for your services (if it is not illegal to use a 3rd party account) but you will have to pay tax for your services.

The individual is making profit in his own name using his secondary address in foreign country - no other person is involved...

 

[thegame]

1) Not true - there are countries in EU that tax gambling profits - as far as I know France, Spain, Latvia, Estonia, Czech republic
2) This can and will change (only one possible direction...)
3) If foreign income (despite it's tax free) must be declared you're (sometimes) inconveniently sharing sensitive information with your tax office which wouldn't be the case if the income is considered local.




The individual is making profit in his own name using his secondary address in foreign country - no other person is involved...

Ok now i got your point.
1. You live in slovakia but you have limited options due to regulation.

2. Via your secondary address in Uk you open accounts on UK licenced books, account still in your name though.

Gambling profits in UK are tax free even if you bet with unregulated books. In Slovakia you can't declare profits from unregulated books as you are breaking the law.

So, you are planning to tell the taxman that a bot was automatically placing your bets without any manual control from slovakia, hense you haven't breached any law and therefore gambling profits are considered legal and tax free.

Uk taxman wouldn't care as gambling profits are legal and tax free even with unregulated books. The biggest issue will be slovakian taxman. Will he be convinced that a machine was able to generate lets say 100k profit without someone monitor it? Doubt any taxman ever faced something similar tbh.

 

[void]

Ok now i got your point.
1. You live in slovakia but you have limited options due to regulation.

2. Via your secondary address in Uk you open accounts on UK licenced books, account still in your name though.

Gambling profits in UK are tax free even if you bet with unregulated books. In Slovakia you can't declare profits from unregulated books as you are breaking the law.

So, you are planning to tell the taxman that a bot was automatically placing your bets without any manual control from slovakia, hense you haven't breached any law and therefore gambling profits are considered legal and tax free.

Uk taxman wouldn't care as gambling profits are legal and tax free even with unregulated books. The biggest issue will be slovakian taxman. Will he be convinced that a machine was able to generate lets say 100k profit without someone monitor it? Doubt any taxman ever faced something similar tbh.

basically you understand it well

except:
1) gambling winnings are tax free at the moment in Slovakia (at least I was told so by my client who is this all about) - it's more about necessity of reporting of foreign income than taxation itself
2) in EU country you can't be prohibited from betting on any site in EU even if it doesn't have the license for given country (bookie can have a problem though)
3) setup and monitoring of the automated betting solution ONLY OUTSIDE the country can be supported by regular traveling to the country - but it will hardly change much about the whole thing being hard to believe (it's true though )

 

[thegame]

basically you understand it well

except:
1) gambling winnings are tax free at the moment in Slovakia (at least I was told so by my client who is this all about) - it's more about necessity of reporting of foreign income than taxation itself
2) in EU country you can't be prohibited from betting on any site in EU even if it doesn't have the license for given country (bookie can have a problem though)
3) setup and monitoring of the automated betting solution ONLY OUTSIDE the country can be supported by regular traveling to the country - but it will hardly change much about the whole thing being hard to believe (it's true though )

1. Doubt any bettor ever declare anything tbh,

2. Wrong. There are many EU countries that prohibit offshore betting even for EU licensed books. Bettor can face even 1 year in jail. Polish and Cyprus law to mention a few countries.

3. Wrong. Such tool does not exists. Automated bots do exists, yet they demand human monitor.

You can think ''betting intermediaries'' as an explanation to the taxman as well. Doubt slovakian law prohibit ''betting intermediaries''. As far as i know, only uk and recently malta ruled that betting intermediaries need a gambling license. Till Slovakia prohibit betting intermediaries, ideally after 5-6 years, your client is on a grey zone if not legal.

https://europeangaming.eu/portal/co...t-of-intermediaries-under-the-new-gaming-act/
https://thelawreviews.co.uk/edition/the-gambling-law-review-edition-4/1194931/united-kingdom