A Lose-Lose Situation: EU Freedoms Versus Italian Taxation on Winnings Prior to Recent Italian Amendments

In Case No. 9001 (14 October 2016),1 a verification notice was issued by the Italian tax authorities against the taxpayer (an Italian resident) on the grounds that winnings
at casinos located in Slovenia were not declared in his tax return; the taxpayer appealed the assessment before the Italian Tax Court of first instance, which decided in favour of the tax authorities and then to the upper Regional Tax Court of Naples. His argument was that such rules on winnings provided for a “less favourable” tax treatment for Italian resident taxpayers who played in EU Member States outside of Italy compared to those applicable to Italian residents who played at Italian casinos. More specifically, taxpayers playing in EU Member States were under an obligation to submit a tax return declaring the winnings to the Italian tax authorities, which were then subject to income tax at a progressive rate, while Italian residents playing in Italian casinos were exempt from both filing duties and taxation. Instead, a substitute 10% entertainment tax was paid by the casino. The issue addressed by the higher court was whether or not such a stark difference in tax treatment between taxpayers playing in Italy and those playing in other Member States infringed the EU freedoms. In order to answer this question, an understanding of the tax regime applicable to winnings paid out by Italian casinos versus other EU Member States is necessary, which is outlined in section 2.

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