Winner new year’s lottery has to pay income tax twice

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The Dutch revenue service (Belastingdienst) has announced that the winner of the Staatsloterij Jackpot will have to pay income tax over these winnings for both 2010 and 2011.

Since 2001 the Dutch income tax is divided into three parts, a tax on wages, a tax on business interests (including dividends), and a tax on savings and investments. The latter category is calculated by taking the money you own on December 31 and the money you own on January 1 of that same year, and halving it. You then pay a one percent tax on the resulting average, the idea being that an average person should be able to realize a profit each year on their savings of investments of 4%, which is essentially a sort of income.

The tax service takes its own formulas very serious and figures that since the prize is won in the dying seconds of 2010, the winner also has to pay this tax on savings over 2010, even if they have not been able to collect and enjoy the prize.

Tax law professor Ruben Freudenthal has been quizzing his students for years on exactly this eventuality, and sides with the Belastingdienst. He told Financieel Dagblad: “Right after the draw the lottery ticket becomes valuable. You could sell it to somebody else.”

The 2010 lottery had a jackpot worth 27.5 million euro. The 2010 tax would amount to 137,500 euro.

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