In Canada, all gambling winnings are tax-free, but a recent court decision has judged that all casino employees must declare and pay tax on their tips received by lucky gamblers. However, when Canadians gamble online at PlayAmo Canada, all winnings are tax-free.
The Canadian Federal Court ruled that tips received by casino employees are not gifts and represent a part of their income.
This most recent judgment coincides with a ruling made in 2018 against a casino worker named Cheng Xia who worked at the Grand Villa Casino in British Columbia.
Cheng Xia did not declare any of the tips he received while working on the gaming floor in 2012. He received over $40,000 in tips during that time, which was more than his base salary of $30,000
Is Gambling Tax Exempt In Canada?
Canadian gamblers do not have to pay tax on any of their casino winnings. The government has come to the conclusion that since gambling is a game of chance and that the money earned is not regular, it should not count as income and therefore is exempt from being taxed.
However, if an individual is involved in the gambling business and derives their income from betting, for example, a professional sports bettor or blackjack player, their income will be taxed.
The plaintiff tried to argue that the casino customers had won tax-free money gambling and that they were gifting him that money. His logic was that his tips should be exempt from taxation.
His case collapsed because, in Canada, a taxable income is defined by an employee’s salary plus other remuneration, including tips.
The Judge explained to him that the patron who wins money at the casino is not liable to pay tax, but when they choose to pay an employee in the form of a tip, that payment transforms the money, and it is now taxable as it constituents a part of the employee’s income.
The Judge acknowledged Xia, who has previous experience providing tax and accounting advice in Canada as a smart and highly educated person. She noted that he was dismissive of current laws in not reporting his full income to tax authorities.
The courts agreed that arguing over the source of the money was not important at all. It made no difference if, at one point in time, the source of the defendant’s tips was tax-free. When he received the money, it instantly became taxable.
Cheng Xia was fined over $8000 due to negligence and willful blindness. Xia has reportedly stopped working at the casino after that case. Now he is liable to pay taxes on all his tips, and he is probably looking for a more lucrative career.
If he doesn’t like paying taxes, he can always play the slots himself and try to win a big juicy free jackpot. Until then, Xia will have to declare his income and pay his fair share of taxes to the state.