The winner of the record PowerBall jackpots has to weigh carefully how much, if any, money is given to friends and family as the helmsman will likely want a cut.
The winner came forward on Tuesday to receive the PowerBall prize from the draw on Tuesday, February 19th.
While the massive gain of R232m is likely to be exempt from income tax if the winner is a casual player, gifts to friends and family are likely to attract taxes, says the tax department in Cape Town ENSafrica,
"With respect to paragraphs 60 to 8 of the Income Tax Act, a taxpayer who is a natural person (ie excluding, inter alia, legal entities such as companies) must make any gain or loss relating to a sale relating to a form of business, do not consider games of chance, games or competitions if these games of chance, games or competitions are authorized by the laws of South Africa and carried out in relation to them.
"Therefore, any income derived from licensed gambling activity obtained by a taxpayer who is a natural person will be disregarded for income tax purposes," the ENSafrica Department said in a statement.
The law firm has carefully drawn attention to the budget review for 2019 of 20 February, which "may in future lead to additional tax considerations on gambling winnings".
However, the picture changes dramatically when the winner decides to shower friends and family with money.
ENS said, "When donating funds between individuals, the donation tax from the donor (ie the winner of the lottery) is to be paid at a rate of 20% on the value of the donated assets, since R30m does not exceed 25% for each value, which exceeds the value R30m.
"In one year of valuation, the amount of the total value of all assets deducted by a donor who is a natural person through donations is exempt to the extent that the assets amount to € 100,000 is not exceeded.
"Although the donation tax on the donor is eliminated, if the donor does not pay the amount due in due time, the recipient will be jointly and severally liable for the tax."
If the winner decides against leaving the money in a savings account and living on the interest, it can also lead to a significant tax bill.
"Interest earned on principal amounts invested in a savings account is included in the taxpayer's annual income and is therefore subject to income tax (net allowable amount) up to a limit of 45%," ENSafrica said.
ENSafrica added this disclaimer: "Our answers below are not to be considered as formal advice and our views reflect our interpretation and application of the relevant provisions of Income Tax Act No. 58 of 1962 (" Income Tax Act ")."
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