Important Italian tax ruling

An attempt by the Italian tax authorities to claim tax on the offshore winnings of an Italian player failed in the European Court of Justice this week, when the Court found that double taxation was contrary to Article 56 of EU principles and treaties.

The publication Courthouse News Service reports that Italian online punters Cristiano Blanco and Pier Paolo Fabretti played and won on websites licensed and taxed within EU member states but outside the jurisdiction of the dedicated Italian online gambling regulatory and tax regime, and were surprised when approached to pay Italian taxes on their offshore winnings.

Blanco took the matter to the Italian courts, which referred the issue to the European Court of Justice, claiming that Italian tax law is discriminatory in that it exempts tax on winnings from Italian casinos because punters already pay an entertainment tax when they play.

The taxman argued that Italian players don’t pay entertainment tax when they gamble outside the jurisdiction of the Italian tax authorities, and they should therefore pay on their offshore winnings. They also claimed that the policy is essential to prevent crime syndicates from laundering money through casinos outside Italy.

In Blanco’s case, officials alleged that he had neglected to declare over $610,000 in winnings outside Italy, while Fabretti owed nearly $66,000 in taxes on his lucky streak in another member state.

In a judgement issued Wednesday, the ECJ found that the Italian tax policy creates disparate tax arrangements for gamblers depending on where they choose to play. This could potentially dissuade gamblers from playing in other member states’ casinos – a violation of the EU’s guarantee of free services, the court said, finding that:

“It must be borne in mind that the freedom to provide services under the EU constitution requires not only the elimination of all discrimination on grounds of nationality against providers of services established in other member states, but also the abolition of any restriction – even if it applies without distinction to national providers of services and to those from other member states – which is liable to prohibit, impede or render less attractive the activities of a provider of services established in another member state where he lawfully provides similar services.”

The decision will be read with interest by many Italian players who have been similarly approached in recent years by the Italian taxman.