These days, almost everyone has a décimo (a one-tenth lottery ticket) or a slip for the Christmas “El Gordo” draw. But do we realize that the Tax Office is playing along with us, too?
In this article, we explain clearly — with figures — how Christmas “El Gordo” winnings are taxed, which taxes apply, which mistakes to avoid, and what choices you can make so you don’t pay more than you should and can plan properly for that unexpected windfall.
Christmas “El Gordo” taxes: when you pay tax and when you’re exempt
These days, almost everyone has a décimo or a slip for the Christmas “El Gordo” draw. But do we realize that the Tax Office is playing along with us, too?
Current rules on the special levy on prizes set the threshold for paying tax (or not) at €40,000. Let’s look at the different scenarios:
- If the prize is €40,000 or less: there’s nothing to worry about — you’re exempt from tax.
- If the prize is over €40,000: this is where the Tax Office steps in, applying a 20% tax on the amount above €40,000.
What happens if you share the ticket?
If the décimo has joint owners, the same rules apply, but with a couple of differences:
- If the prize is €40,000 or less: it’s treated the same as a single owner — you’re exempt.
- If the prize is over €40,000: the exempt amount is split proportionally according to each person’s percentage share of the ticket.
What if the prize is non-cash (a prize in kind)?
If your slip is for draws where the prize isn’t money (a TV, a car, a house, etc.), the calculation gets more complicated. The law states that the taxable base used to calculate the tax is:
Market value of the item − the exempt amount − the withholding payment made on your behalf
- The market value is the price the item would sell for.
- The exempt amount is €40,000.
- The withholding payment is the amount the organizer has paid to the Tax Office on your behalf. This withholding is 20% once you subtract the exempt amount from the market value.
When do you have to pay this tax?
In general, the paying entity will automatically deduct this withheld amount before handing over the prize. If they don’t, you must file the relevant tax form at the time the prize is paid or credited. Anyone who doesn’t exceed the €40,000 exemption, or where the withholding payment has already been made, is exempt from filing that tax form.
For more information, see Law 35/2006 of 28 November.
Christmas “El Gordo” and taxes: smart choices so you don’t pay more than you should
Winning the Christmas “El Gordo” can make your day… and it can also complicate your year if you don’t understand how the taxes work. Knowing what’s exempt, how much the Tax Office withholds, whether you need to report the prize (or not), and what it means if the ticket is shared or registered in a company’s name helps you protect your winnings and avoid nasty surprises with the Tax Agency.
If you’ve won a significant prize or you’re weighing up how to manage it personally or through a business, don’t make tax decisions based on guesswork — or just what people say around the office.
At GCO, we have a team of tax advisers who can help you:
- Review the real impact of the prize on your tax situation.
- Plan how to invest or allocate the money in the most tax-efficient way.
- Avoid issues with the Tax Office related to shared tickets, gifts/donations, or companies.
If you’d like us to review your case or your company’s situation, get in touch and we’ll go through it with you step by step.
