Casino Tax Refund for Canadians and International Residents from the 30% US Casino Winnings Tax
Nonresidents of the USA are subject to a casino winnings withholding tax of 30 percent on the gross proceeds from gambling winnings in the United States if that income is not effectively connected with a U.S. trade or business and is not exempted by treaty. However, a recent change in the law provides for an Exclusion of Certain Horse-Racing and Dog-Racing Gambling Winnings from the Income of Nonresident Alien Individuals. The winnings and the tax withheld are reportable on Forms 1042-S
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No tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States. A Form W-8BEN is not required to obtain the exemption from withholding, but a Form W-8BEN may be required to inform the withholding agent that the person is a foreign person. When a Form W-8BEN is submitted to the withholding agent solely for the purpose of identifying the payee as a foreign person.
Most gambling winnings are subject to reporting on Form 1042-S. However, proceeds from a wager placed in blackjack, baccarat, craps, roulette, or big-6 wheel are not amounts subject to reporting.
On their U.S. federal individual income tax returns, nonresident aliens are taxed at graduated rates on net gambling income won in the U.S. that is effectively connected with a U.S. trade or business.
Tax Treaties
Gambling income of residents (as defined by treaty) of the following foreign countries is not taxable by the United States: Austria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, Russian Federation, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom.
Regulations generally provide that an Individual taxpayer identifying number (ITIN) must be furnished on a Form W-8BEN or Form 8233 in order for a foreign individual to obtain the benefit of reduced withholding under an income tax treaty. The U.S. Treasury Department and the IRS are aware of certain unusual cases in which an unexpected payment to a nonresident alien individual claiming treaty benefits arises on short notice. In general, a foreign individual receiving such an unexpected payment currently may be unable to obtain a ITIN prior to payment. In such a case, unless the foreign individual already has a ITIN, the withholding agent would be required to withhold tax at the 30 percent rate, rather than the treaty rate, and the foreign individual would be required to file for a refund in order to obtain the benefits of the income tax treaty. To alleviate this filing burden on foreign individuals, IRS has put in place administrative procedures that will allow certain Certifying Acceptance Agents, to apply for and obtain an individual taxpayer identification number (ITIN) for such individuals.
Canadian Tax Treaty
Gambling winnings of Canadian residents are subject to withholding at 30 percent on the gross proceeds from gambling winnings in the United States. However, the Canadian tax treaty entitles residents of Canada who are taxable by the United States on gains from wagering transactions to deduct U.S. source losses from U.S. source wagering transactions.
source: irs.gov
