The Directorate of Taxes refers to your e-mails of 29 May and 23 June 2006 and previous correspondence, your e-mail of 18 January and the Directorate's reply of 31 January 2006, also published at skatteetaten.no. Reference is also made to the Directorate’s letter of 7 October 2004 to all the county tax offices and Oslo tax assessment office regarding WGI and the letter to Lister tax assessment office of 31 October 2005 regarding Sweepstakes 8.
Section 5-50 second paragraph (d) first point is worded as follows (from the 2003 income year inclusive):
“The following are not deemed to constitute sources of income, irrespective of whether payment is made collectively or in instalments over a period of time”
“d) games of chance and lotteries in another EEA state corresponding to games or lotteries which are lawful in Norway and subject to official supervision and control in the home country.”
The conditions for the gain being tax-free in accordance with the abovementioned provision are therefore as follows:
- that the game/lottery is in another EEA state
- that the game/lottery corresponds to lotteries which are permitted under Norwegian legislation
- that the game/lottery is carried on in accordance with official permission in the state concerned
- that the game/lottery is subject to official regulation and control in the state concerned.
The conditions are cumulative, i.e. all conditions must be met in order for the gain to be tax-free.
It is apparent from the wording of the act compared with the preparatory work that the winner of the gain has the burden of proof as regards demonstrating that the conditions for tax exemption are met; see Odelsting proposition no. 1 (2003-2004) page 20.
Under Norwegian lottery legislation, games/lotteries can generally only be held to generate income for humanitarian or benevolent purposes; see Act No. 11 of 24 February 1995 regarding lotteries, etc. Section 5 first paragraph.
Sweepstakes8 was a weekly lottery for members of WGI. The lottery is currently offered to members of Aspiritus. Stiftelsen International Lottery in Liechtenstein Foundation (ILLF) is the operator for Sweepstakes8 and four other lotteries; see the foundation's website. Regarding Sweepstakes8, it is stated that “5 % of all proceeds donated to charities”. The same percentage share applies to the Golotto lottery; in the case of LOTTOLUCK 10 percent of all proceeds are donated, while in the case of Play PLUS Lotto, the percentage share is 25 percent “of all proceeds”. For Globelot, the share for charitable purposes is not specified. The Directorate interprets this as indicating that it is up to the individual lottery to determine the share which is used for charitable causes and the basis for calculating the share.
For Sweepstakes8, private subjects are left with 95 percent of the stakes. Only 5 percent is used for charitable causes. It is apparent from the preparatory work for Section 5-50 second paragraph (d) of the Tax Act that purely commercial games where the gain percentage is very high and where private subjects retain the profit will not correspond to tax-free games in Norway. This means that gains from casinos, etc. will still be taxable, as they are at present. The legislative amendment is intended to put the tax-related treatment of gains from foreign games of the same type as those which are offered in Norway and subject to official controls and supervision on an equal footing. In this way, typical gains from the Finnish lotto or the Swedish V 75 will be deemed equivalent to the Norwegian lotto and the Norwegian V 75; see Odelsting proposition no. 1 (2003-2004) section 6.3. Sweepstakes8 does not correspond to games or lotteries which can lawfully be offered in Norway. This condition for tax exemption is not met.
The fact that Sweepstakes8 is only offered to members of WGI is another argument in favour of the view that the game does not correspond to any games or lotteries which can lawfully be offered in Norway.
WGI Inc was registered on the British Virgin Islands. It is stated on the foundation’s website that ILLF is operator for Sweepstakes8 on behalf of Aspiritus, that Aspiritus owns the game, and that the game can only be played via Aspiritus’ website. Aspiritus is WGI's successor. The following is stated on Sweepstake8’s website: ”Operated by: The International Lottery in Liechtenstein Foundation for Aspiritus.” The Directorate assumes that the situation was the same under WGI Inc. The Directorate believes that the foundation is only an operator for the lottery and that it has not been documented/substantiated that the home country is Liechtenstein.
They have enclosed a copy of Bestätigung of 27 June from Regierung des Fürstentums Liechtenstein. The copy confirms that International Lotteri in Liechtenstein Foundation has been granted a licence to run a lottery via the internet.
They have also enclosed a copy of Bestätigung of 27 June from Regierung des Fürstentums Liechtenstein. This confirms the collaboration between the International Red Cross, Red Crescent Societies and der Internationalen Lotterie in Liechtenstein Stiftung.
The following remarks are made regarding these copies: They are not original examples and do not confirm that Sweepstakes8 is covered by the licence, or that the lottery is subject to official supervision and controls.
The Directorate maintains that gains from Sweepstakes8 are not covered by the tax exemption in Section 5-50 second paragraph (d) of the Tax Act. Gains from Sweepstakes8 are taxable in accordance with Section 5-50 first paragraph of the Tax Act. Gains are taxable when the value exceeds NOK 10,000.