On January 6, Spain traditionally holds the El Niño lottery—a major event that many consider the true start of the year. On this day, as the country celebrates the Day of the Magi (Reyes Magos), millions of Spaniards wait anxiously for a stroke of luck. But it’s not just the lucky ticket holders who anticipate this day: the state treasury also prepares for a substantial cash inflow.
In 2026, if all tickets for the first and second prizes are sold, the state budget will receive an additional €21.45 million. That’s nearly two million more than the previous year, thanks to an increase in available series. El Niño is the second most important drawing after the Christmas lottery, and public interest remains consistently high.
Taxes on luck
This year, the total El Niño prize fund will amount to €770 million—a significant figure, but not all of it will go to the winners tax-free. By law, only the top two prizes are taxed: for each winning first prize ticket (€200,000) and second prize ticket (€75,000), the state takes 20% of the amount exceeding €40,000. That means the treasury collects €32,000 from each first prize ticket and €7,000 from each second prize ticket.
The third prize, which is €25,000, is fully exempt from taxation. All other winnings are also tax-free as long as they don’t exceed the established threshold. However, if a ticket is purchased as part of a syndicate and each participant’s share exceeds €40,000, everyone must report their share to the tax authorities and pay their appropriate portion.
Who pays and how
In the case of group lottery ticket purchases, all participants must identify themselves to the tax authorities. Even if each person’s share is less than 40,000 euros, the tax is withheld from the total prize and then distributed proportionally. This rule applies regardless of the number of people involved or the size of their individual shares.
Interestingly, the lottery win tax does not affect the calculation of personal income tax (IRPF) for individuals. The winnings do not increase the taxable base unless the winner decides to invest, for example, by depositing them in a bank and earning interest—in that case, only the interest income is subject to tax. Lottery winnings are also not taken into account when applying for scholarships, social benefits, or other forms of assistance where only income, not assets, is relevant.
Legal entities and foreigners
For companies, foundations, and associations, the rules are different. They are required to include the entire prize amount in their annual income, with the withheld tax counted as an advance payment. In 2024, the number of major prizes won by legal entities surged—43 times higher than the previous year. There was also a noticeable increase in large prizes awarded to non-residents—up by 14 times. For non-residents, the tax is withheld automatically, and there is no need to declare it in Spain.
Authorities have openly expressed concern: in the past three years, legal entities have received over 243 million euros in prizes, while non-residents have collected almost 247 million euros just in 2024. Tax authorities are insisting on the need for thorough scrutiny of these payouts to eliminate possible tax evasion and money laundering schemes.
Debate Over Fairness
The issue of the tax-exempt threshold remains contentious. Currently, winnings up to 40,000 euros are tax-free, but experts argue for a return to the previous limit of 2,500 euros, which was in place until 2018. They believe it’s odd that a large lottery prize is exempt from taxes when, for instance, unemployment benefits or a small subsidy are not. If the threshold were lowered, the government could potentially collect an extra 10 million euros from just El Niño alone.
For now, however, no changes are expected. For most lottery participants, the taxation system remains clear and straightforward: if you win big, be ready to share with the state. But for companies and foreign nationals, the situation is becoming increasingly complicated, and tax authorities clearly have no intention of letting any major prize slip through the cracks.
Comparing With the Christmas Lottery
For perspective: each December, when the famous Christmas Lottery is held, the state receives about 180 million euros in taxes from prizes. That’s almost nine times more than from El Niño, which is hardly surprising—this Christmas draw remains the country’s biggest and most popular lottery.
Meanwhile, El Niño continues to draw attention—not only for the excitement, but also for the life-changing possibilities it offers. As always, the state doesn’t miss the chance to boost its budget thanks to lucky citizens. The only question is, who will be the fortunate one this time—and how much of their winnings will end up in the treasury.
