Is the purchase of a lottery ticket that supports charities deductible on the Dutch income tax return? This is a question that arises every year when filing the tax return. And if you can’t deduct the entire contribution, can you perhaps deduct part of the payment? Maybe in proportion to how much money the lottery gives to charities? Most people have heard of the Dutch charitable deduction. Donations to charities or institutions can be deducted from income on the income tax return in the Netherlands. This means that the amount on which tax has to be paid is reduced, resulting in less tax payable. It is therefore a logical thought that payments to lotteries, which donate a significant amount to charities, are partly deductible as a donation. But is this the case?
Specifically, The National Postcode Lottery, The Friends Lottery, and The Bank Giro Lottery are lotteries that advertise supporting charities. Technically, part of the ticket price goes to a charity. So, as an individual, you also indirectly donate to charities. Some people might even choose a particular lottery precisely because it supports charitable causes. The Tax Authority maintains that the purchase of lottery tickets is not deductible. This dispute eventually went to court.
When is a donation deductible?
A donation is only deductible if there is no direct quid pro quo. This is also the reason why a lottery ticket is not deductible as a donation. After all, you receive something in return: the chance to win money. This was also the court’s position when the case was presented. Therefore, a lottery ticket is not tax-deductible.
What are the conditions to deduct a donation?
First and foremost, the institution must be an ANBI (Public Benefit Organisation). The National Postcode Lottery, the Sponsor Bingo Lottery, and the Bank Giro Lottery all have this ANBI status. The second condition is that there should be no quid pro quo for the donation. Finally, you must be able to prove, for instance through bank statements, that you’ve actually made the donations. And you can only deduct the part of the donations that exceeds 1% of your threshold income. There’s also a maximum deduction of 10% of your threshold income. The issue with lotteries lies in the second requirement. A quid pro quo must not be present for the donations. With lotteries, this is indeed the case. In return for the payment, there’s a chance to win a sum of money. Therefore, charitable deductions are not allowed for lotteries, even if the lotteries use (part of) this money for charitable purposes and have ANBI status.
There was a legal case where an individual tried to deduct half of his lottery money as a donation since half of his contribution went to charities. He argued that 50% of the contribution was for the lottery, and 50% of his contribution was to support charitable causes. On September 2, 2014, the court ruled on this case (Court of Appeal Arnhem-Leeuwarden, ECLI:NL:GHARL:2014:6761). There was no donation as there was a quid pro quo: the chance to win something. The contribution cannot be divided into a part for the lottery and a part for supporting charitable causes.
Which Lotteries are Deductible?
As noted above, a lottery ticket is not tax-deductible. Thus, it’s not possible to claim it as a deduction in the income tax return. For clarity, below is an overview of various lotteries and whether they are deductible:
How to Still Get a Benefit?
The likelihood of winning the lottery is slim (almost zero). Lotteries essentially cater to those who feel they pay too little in taxes and wish to contribute more. By buying a ticket, you’re essentially paying more tax. For instance, the State Lottery contributes a significant part of your contribution directly to the state treasury. Lotteries also target those who overestimate their chances of winning.
Others participate in lotteries because they enjoy dreaming. Winning, realistically, isn’t likely. They cherish dreaming of lottery wins and mentally spending the prize money. This might be the best reason to play the lottery. Just remember that the chances of winning are virtually nil. And you can dream without spending money on tickets. Imagine finding a suitcase with 30 million euros on the street tomorrow. Or envision investing in that one stock that’ll make you wealthy. If you invest, that’s a more realistic scenario than winning the lottery! Want to get some advantage – since you can’t deduct the lottery? Stop buying tickets. Your saved money is your immediate gain. That’s money saved.
You can also get benefits by letting Taksgemak handle your Dutch tax returns. We are experts in tax law and know the regulations well. We ensure that you reap the full benefits of all available deductions and tax advantages, whether you’re navigating the intricate landscape of the Dutch mortgage interest deduction or seeking clarity on the tax implications of owning property abroad. So, instead of dreaming about winning the lottery, consider investing your money in lowering your tax burden by hiring us for your tax return.
About the author: Kelly Hendrikse blends her interest in entrepreneurship with her expertise in tax advice at Taksgemak. She assists both businesses and individuals in understanding tax rules, making complex matters more manageable. Committed to keeping her clients on the right path, she proves to be a valuable ally in any tax-related matter.