Japan Already Considering Tax Rules For Foreign Winners at Unbuilt Integrated Resorts

Posted on: December 2, 2019, 04:00h. 

Last updated on: December 2, 2019, 10:50h.

Todd Shriber @etfgodfather Read More

Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Japanese politicians are evaluating proposals that would implement withholding taxes on international winners at the country’s yet-to-be-constructed integrated resorts. The politicians claim that laying out a tax system prior to the venues being built could make life easier for revenue collectors and gaming companies.

A base definition of a withholding tax is the portion of an employee’s earnings that he or she never accesses because it’s sent directly to the government. In casino gaming terms, the withheld “earnings” are a portion of gambler’s winnings that are sent on to federal coffers.

The US and South Korea are among the countries with casinos that employ withholding tax systems. In the US, the IRS taxes all gambling-related winnings at the same rate – 25%. That’s applicable to winners of, say, $10,000 at Del Mar Racetrack, or someone fortunate enough to garner $1 million from a spin of a slot machine at a Las Vegas Strip property.

If we do not decide on a certain framework in advance, it will affect the investment decisions of operators,” said an unidentified Japanese government official in an interview with the Kyodo News.

Casino-related tax proposals are expected to be part of a broader levy framework Japan is considering for fiscal 2020. But those new ideas would not go into effect until mid-2021.

Some Time For Considerations

Some Japanese cities are actively pursuing integrated resorts. But it could be some time before those venues are up and running in Asia’s second-largest economy. It is believed that policymakers in Tokyo won’t even begin fielding proposals from other cities and prefectures until early 2021, and that process could extend to July 30, 2021.

Assuming that process isn’t surprisingly expedited and that operators aren’t selected soon thereafter, Osaka’s hopes of having a gaming property even partially ready in advance of the 2025 World Fair could be dealt a serious blow.

The benefit of the expected process is that it will give politicians ample time to develop adequate regulatory and tax frameworks, including measures to prevent gamblers at Japanese casinos from manipulating chip counts to avoid paying taxes.

The requirement to keep records of purchases and win-loss results is designed to prevent players from pretending that chips they won were ones they purchased, or from leaving some chips with a friend inside the premises to reduce their winnings amount,” according to the Kyodo News.

Regulators want to implement a tax on the difference between the amount of chips purchased by players and what they redeem into cash prior to leaving the casino.

US Inspiration?

In the US, nonresident aliens, the terminology used by the IRS, are subject to a 30 percent flat tax on gambling winnings, and losers cannot take tax deductions, a luxury afforded to American citizens. Due to a tax treaty with Canada, Canadian gamblers can deduct losses incurred at US gaming properties.

Gambling winnings in the US are reported to the IRS if the amount won either exceeds $600 or is 300 times the player’s initial wager.

Typically, gaming companies report winners to the tax man if the amount won tops $1,200 on slots or $1,500 on keno.

Tax treatment of table games is far less punitive than on bingo, keno, slots and related fare.

“No withholding is required on non-business gambling income from Blackjack, Baccarat, Craps, Roulette, or Big 6 Wheel,” according to the IRS.