Pasapalabra, Boom, Ahora caigo, La rouleta de laluck... are programs that become more popular every day in Spain, television contests in which great prizes are offered and in which several contestants fight to get the great acclaimed prize, and is that one of the great lucky ones has been Fran González, who at the beginning of the year won no more and no less than 1.542.000 euros from the Pasapalabra jackpot.

However, all that glitters is not gold, and as several winners of similar contests have stated, a large part of the prize is lost along the way, ending up in the hands of the tax authorities, who take a good chunk of the prize.

This has been happening since February 1992, when the Ministry of Finance agreed to withhold 25% of cash prizes awarded on television that exceeded 100.000 pesetas.

In the specific case we have mentioned, Pasapalabra will not even pay Fran that million and a half, since to begin with a 19% withholding tax will be applied, so that later, when making the tax return, when including that money that he has won, the Tax Office will tax him close to 48% of the prize.

In other words, Fran initially had approximately €293.000 withheld for income tax, but the tax authorities later charged him an additional €435.000, resulting in a total tax bill of around €728.000. Fran thus received 'only' €814.000 of the €1.5 million he earned.

Fran's example on the game show Pasapalabra helps us understand how much tax we owe when we win prizes in competitions. While we might think this only applies to big prizes, the reality is that this formula applies to everything from large jackpots to supermarket gift baskets , and generally to any competition with a prize you can enter.

So what should I know to avoid surprises when winning a prize?

Well, the first thing is to know that there are differences in the taxation of prizes, depending on whether they are cash or prizes in kind. That is, you are not taxed the same when you earn money as when you earn a car, for example.

Cash prizes are subject to income tax, both through the withholding of 19% of personal income tax by the organizer of the draw or program, and later, when filing your income tax return, where the percentage will vary from 19% to 52%, depending on the taxable base and the area in which you reside.

Well, for the Treasury, the money from the raffles is an income that must be included in the income tax return, given that they are capital gains to be integrated into the general tax base, that is, the prize will be added to our income to pay taxes. IRPF, since the 19% withholding is nothing more than an advance that we pay to the Treasury on account of what we will later have to pay when making the income.

However, things change when the prize isn't money, but a car or household appliances. While these cases are treated exactly the same by the tax authorities—since the only difference between a prize in kind and a cash prize is the income tax withholding—the taxes we have to pay will be the same. The key lies in the value of the prize in kind, as this is what the tax authorities will use to calculate the taxable base.

That is, the Tax Agency will use the value of the prize in euros and the resulting amount will be added as capital gain to integrate it into the personal income tax tax base.

So, for example, if we win a supermarket basket valued at 1.200 euros, this will be the amount on which we will pay taxes in our Income Tax return.

This being the big problem with prizes in kind, because since we do not receive cash we might think that we are not obliged to pay taxes, potentially suffering a great fiscal scare because for the Treasury it is as if we had received that money in cash.

Therefore, at Fimax we advise you to always declare any prizes you may win, thus avoiding unnecessary tax surprises, and remember that from a large jackpot of one and a half million euros to a shopping spree valued at one thousand euros, both will be subject to taxation.