We have been advising clients with questions about sports betting taxation for a long time, and in recent years, more and more people have been turning this activity into not just a hobby, but a way of life.

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The first thing we must keep in mind is that sports betting is taxable, provided that profits are generated, and all information must be recorded in the Personal Income Tax Return (IRPF). Therefore, it is the individuals who register on sports betting platforms who are required to file this tax.

The second thing to keep in mind is that profits obtained do not always have to be declared, as there are minimum thresholds for doing so:

1. When the profit from gambling or other capital gains or yields from movable capital exceeds 1,600 euros.
2. When the profit from gambling exceeds 1,000 euros, provided that earned income from work is received in an amount exceeding 22,000 euros (or 14,000 euros if it comes from several payers).

From the previous paragraph, we can conclude that having calculated the profit obtained from gambling is not sufficient information to know if we must pay tax in the Income Tax Return. We will need to enter all the data into the corresponding tax return before venturing to make a final decision.

Thirdly, we must learn to calculate gambling gains and losses, and for this, we will rely on the reports provided to us by the sports betting houses. At this point, we are obliged to clarify that some betting houses allow you to download the corresponding report through their website using the user menu. However, there are others that require the user to write an email with said request. This report is very important, as it will be the only valid justification for the Tax Agency in case you need to prove the gains or losses obtained during an inspection.

The Income Tax Return analyzes all the fiscal information of a person during a calendar year, that is, from January 1st to December 31st. Therefore, to give a practical example of how to calculate a gain or loss from gambling, let's say we want to file the 2021 Income Tax Return for a client who has placed bets on “Juegging,” and we already have the sports betting results report for the 2021 fiscal year. Using that report, we must apply the following formula:

Balance as of December 31st - Balance as of January 1st - Deposits + Withdrawals

If the report received is as follows:

We must apply the formula in the following way:

• Balance as of December 31, 2021 = 0€ (see final balance)
• Balance as of January 1, 2021 = 0€ (see initial balance)
• Deposits 2021 = 446€ (see deposits)
• Withdrawals 2021 = 1,349€

Formula = 0 – 0 - 446 + 1,349€ = 903€ of generated profits to be included in the 2021 Income Tax Return

In this case, we observe that there is a possibility of not paying tax in the 2021 fiscal year Income Tax Return, as the required minimums are not met. However, if we finally observe that there are other capital gains that do require taxation, how much should we pay for the generated gambling profits?

To do this, we must consult the capital gains tax brackets for 2021 published by the Tax Agency. In the current 2021 fiscal year, it is indicated that for gains from 0 to 12,450€, 19% is paid. This allows us to conclude that the amount to be paid for the 903 euros of profit from sports betting is 171.57 euros.

Capital Gain = 903 * 19% = 171.57€

By way of clarification, the progressive brackets for the 2021 Income Tax Return for capital gains are as follows:

• From 0 to 12,450 euros: 19%
• From 12,450 to 20,200 euros: 24%
• From 20,200 to 35,200 euros: 30%
• From 35,200 to 60,000 euros: 37%
• More than 60,000 euros: 45%

We find it important to indicate that losses from sports betting can only be offset by gains derived from sports betting and only in the same fiscal year in which those losses occur.

Finally, we would like to point out that failing to declare sports betting profits can lead to penalties of up to 100% of the generated and undeclared profits. From the Nomaspapel consultancy, we recommend that all our clients not only declare the current year correctly but also the Income Tax Returns for pending years, as we are aware that sports betting platforms are reporting all profits generated by their clients to the Tax Agency, and the Administration has 4 years to inspect, or 5 years in the case of a tax crime.