Reporting Lottery Winnings on Your Italian Tax Return

Waking up to an email saying you won an overseas lottery feels like a dream—until the Italian Revenue Agency demands a massive cut. I remember staring at my tax return completely terrified after winning a modest sum on a foreign ticket, realizing it wasn’t tax-free here. This guide explains exactly how to legally report lottery winnings in Italy without triggering devastating fines.

Domestic vs. Foreign Winnings: The Golden Rule

The Beauty of Italian State Lotteries

If you buy a Gratta e Vinci (scratch-off) at the local tobacco shop or win the SuperEnalotto, you do not need to worry about your annual tax return. Winnings from Italian state-sanctioned lotteries and casinos managed by the Customs and Monopolies Agency (ADM) are taxed directly at the source.

The state automatically deducts a flat withholding tax—usually around 20% on prize amounts exceeding €500—before the money is ever handed to you. Because the tax is definitively settled at the source, you receive the net amount. You do not need to declare Italian lottery winnings on your Modello 730 or Modello Redditi PF. It does not increase your overall taxable income, and it will not push you into a higher bracket. For expats trying to balance their Cost of Living in Italy 2026: Budgeting for Expats, a local win is true, untaxed liquidity.

In Italy, the taxation of lottery winnings depends on where the prize is earned. Winnings from Italian state-run lotteries, such as those organized by the customs and monopolies authority, are generally taxed at source. This means the tax is withheld before the prize is paid out, and recipients usually do not need to declare these winnings again in their annual tax return.

However, the situation differs for foreign lottery winnings. If an Italian tax resident wins a lottery prize abroad, the amount must typically be declared in their Italian tax return as part of their worldwide income. These winnings are usually subject to standard income tax rates unless specific exemptions or treaties apply. In addition to income reporting, if the winnings are held in foreign bank accounts or investments, they may also need to be declared in the Quadro RW section, which tracks foreign financial assets. Failure to report such assets can result in penalties.

It is also important to maintain proper documentation, including proof of the win, tax already paid abroad, and any related financial records. In some cases, foreign tax credits may apply to avoid double taxation, depending on agreements between Italy and the country where the winnings originated. Given the complexity of cross-border taxation, consulting a tax professional is advisable. Proper reporting ensures compliance, avoids penalties, and helps taxpayers manage their obligations efficiently under Italian tax law.

The Brutal Reality of Foreign Winnings

If you win a foreign lottery—such as the US Powerball, EuroMillions, or a payout from a non-ADM overseas online casino—the rules change drastically. The Italian government considers these foreign winnings to be fully taxable personal income.

Under Article 67 of the Italian Tax Code (TUIR), winnings from foreign lotteries and unapproved overseas online platforms are classified as Redditi Diversi (Miscellaneous Income). Unlike Italian winnings, these are not hit with a flat 20% tax. Instead, the entire gross amount is added to your total annual income and taxed at Italy’s standard progressive IRPEF rates. A major win will instantly push you into the top tier, meaning nearly half of your prize belongs to the Italian state. To understand exactly how much you stand to lose, review the Italian Income Tax Brackets for 2026.

How to Report Foreign Winnings on Your Tax Return

Using the Quadro RL

You generally cannot use the simplified Modello 730 if you need to declare foreign lottery winnings; you must file the more comprehensive Modello Redditi PF. Within this specific form, you are legally required to report the winnings in Quadro RL, the section explicitly designated for Redditi Diversi.

You must declare the total gross amount won during the calendar year. A crucial, incredibly frustrating detail for expats is that you cannot deduct the cost of the lottery tickets or any aggregate gambling losses. If you spent €1,000 on tickets throughout the year and eventually won €5,000, you must pay progressive IRPEF taxes on the full €5,000 gross prize, not the €4,000 net profit. This strict adherence to gross profit reporting is a common theme in Italian taxation, similar to the rigid calculations found when Understanding Trattamento di Fine Rapporto (TFR) in Italy.

Navigating Double Taxation and Foreign Tax Credits

If you win the US Mega Millions, the American government will immediately withhold 30% for federal taxes because you are a non-resident alien. When you subsequently report that same gross winning on your Italian Quadro RL, you face the nightmare of double taxation.

Fortunately, Italy allows you to claim a foreign tax credit (credito d’imposta) for the taxes definitively paid abroad. You can theoretically subtract the 30% paid to the IRS from the 43% owed to Italy, paying only the difference to the Agenzia delle Entrate. However, claiming this credit requires extensive documentation proving the foreign tax is final and non-refundable. Navigating these double-taxation treaties is just as complex as the scenarios outlined in our guide on US-Italy Tax Compliance: Form 8891 vs Modello 730.

Feature	Italian State Lotteries (ADM)	Foreign / Unlicensed Lotteries
Tax Rate	Flat withholding (e.g., 20% over €500)	Progressive IRPEF (23% to 43%)
Tax Point	At source (deducted before payout)	Year-end tax return
Declaration Required?	No	Yes (Modello Redditi PF)
Relevant Tax Form Section	N/A	Quadro RL (Redditi Diversi)
Deductible Losses?	No	No (Taxed on Gross Win)

Moving Your Winnings and Wealth Taxes

Declaring the Cash in Quadro RW

If the lottery payout is deposited into your foreign bank account, your tax obligations do not end with the Quadro RL. Any foreign financial account holding your windfall must also be declared in Quadro RW.

The Quadro RW is used for fiscal monitoring and triggers the IVAFE wealth tax, which is a 0.2% annual tax assessed on the value of your foreign financial assets. If you leave your winnings sitting in a US or UK bank account, you must declare the account balance here. Failing to report the existence of the foreign account carrying your winnings can result in massive administrative fines ranging from 3% to 15% of the total undeclared amount. Understanding how these monitoring declarations work is critical, and the mechanics are nearly identical to the rules explained in Declaring a Foreign Property in Italy’s Quadro RW.

Repatriating and Investing the Windfall

When tax season arrives, your Italian commercialista will issue an F24 payment form for the IRPEF taxes owed on the winnings. This bill must be paid in euros. If your lottery winnings are sitting in a foreign currency, sending a direct international bank wire to Italy to cover the tax bill will subject you to predatory institutional exchange rates and hidden banking fees.

Savvy expats use Wise to repatriate their winnings. By moving the foreign funds into Wise, you can convert your windfall to euros at the real, mid-market exchange rate. You can then use the local European bank details provided by Wise to pay your F24 tax bill directly, completely bypassing the massive markups traditional banks charge on large transfers. Managing your cross-border liquidity efficiently is a mandatory survival skill, just as important as knowing your rights when Navigating Italian Bureaucracy: Comune and Prefettura.

Once the massive tax bill is settled, you need a strategy for the remaining capital. Leaving large sums of cash in an Italian bank exposes you to localized inefficiencies, and Italian mutual funds are heavily taxed and restrictive. Instead, many expats prefer to park their post-tax windfall in a globally recognized brokerage like Interactive Brokers.

Keeping your newly acquired wealth in Interactive Brokers allows you to invest in international equities and ETFs with minimal trading fees, securely shielding your capital while maintaining clean, standardized tax reporting for your future Italian returns. By combining efficient, low-cost currency transfers through Wise with long-term wealth management via Interactive Brokers, you can protect and maximize whatever is left of your lottery win against the heavy hand of the Italian tax authorities.

References

Primary sources (official)

• Agenzia delle Entrate – Modello Redditi Persone Fisiche (Quadro RL and Quadro RW) – https://www.agenziaentrate.gov.it/portale/web/guest/modello-e-istruzioni-redditi-pf-2024
• Ministero dell’Economia e delle Finanze – Dipartimento delle Finanze – https://www.finanze.gov.it/it/

Other helpful sources

• Fiscomania – Tassazione delle vincite da casinò e lotterie estere – https://fiscomania.com/vincite-al-casino-tassazione/
• Studio Bocca – Taxation of Foreign Income in Italy – https://www.studiobocca.it/en/taxation-of-foreign-income/

Disclaimer

The information provided in this article is for educational and informational purposes only and does not constitute official tax, financial, or legal advice. Italian tax laws regarding the classification of foreign lottery winnings as Redditi Diversi, the application of progressive IRPEF rates, and the mandatory reporting requirements under Quadro RL and Quadro RW are highly complex and subject to frequent legislative updates. Always consult directly with a dually qualified international tax advisor or a certified Italian commercialista to review your specific foreign payouts, double-taxation treaties, and tax return filing requirements before making any financial decisions or moving large sums of capital.