The European Court of Justice (ECJ) has an issue with Spanish gambling laws – specifically as they apply to gambling tax in Spain. As things stand right now, players who win money through lotteries and games of chance that are offered by certain domestic entities are not required to pay any tax on their winnings. Conversely, players who win money through foreign-based lotteries and games of chance must pay taxes on their winnings.
The ECJ notes that this practice unjustly discriminates against foreign operators, and flies in the face of the EU’s guarantee to its member countries regarding the freedom to offer services across national borders.
Not all land-based gambling organizations and online gambling sites in Spain give out tax-free winnings. A stipulation is in place that says the group must have a charitable connection. To date, winnings are not taxed from lotteries and games organized by Loterías y Apuestas del Estado (Spanish State Lotteries and Betting), the Comunidades Autónomas (Autonomous Communities), the Spanish Red Cross or the Organización Nacional de Ciegos Españoles (Spanish National Association for the Blind).
Tax will, however, be levied on similar games offered by foreign operators, even if the groups are operated from within the EU. The Spanish government insists that the origin of the games has nothing to do with it, arguing instead that the tax breaks come down to a matter of social policy, since the exempt games are all offered by charitable organizations. The ECJ in turn noted that if this were the case, the tax exemption should equally apply to games offered by similar entities in other EU countries.
Ultimate, the ECJ found that the Spanish tax exemptions cannot be justified on the grounds of protecting the social order because they encourage gambling and may therefore be self-defeating. No official word has been released regarding the actions the ECJ will take to solve the issue.