To determine taxation on race winnings, the owner’s degree of participation must be defined: To be a non-participating owner and benefit from tax-free winnings, the owner must mandate a professional to manage his horse’s racing career, otherwise the owner is considered to be a participant and is taxed under the non-professional or professional BNC (non-commercial profits) scheme and can deduct losses. Capital gains, after deduction of various allowances, are included in the owner’s income.
The race winnings achieved by the owner of a racehorse who is a landless breeder or not a breeder and who simply entrusts his horse to a trainer without exerting any diligence to create a source of revenue are not considered as taxable products and are therefore exempt from income tax. In this case, only the profits or capital gains resulting from the sale of horses after deduction of allowances are taxed under the IRPP (personal income tax).
Race winnings and capital gains achieved by the owners not fulfilling the above-mentioned tax exemption conditions as well as the profits or capital gains obtained by landless breeders from the sale of their horses are taxable under the non-commercial profits (BNC) scheme.
- Professionals: when the owner exercises a professional activity, losses are deducted from profits of the same type achieved during the tax year by the members of the tax household. If there are no profits, the loss is deducted from the total income under conditions of common law.
- Non professionals: when the activity exercised is not professional, the loss cannot deducted from a professional profit or from the total income. It can only be deducted from profits resulting from similar activities during the same year or the next five years.