How much incomes from lottery winnings shall be taxable? How to calculate PIT for income from lottery winnings in Vietnam?

Is lottery winnings considered taxable income in Vietnam?

According to Clause 6, Article 3 of the Personal Income Tax Law 2007, taxable income is defined as follows:

Taxable Income

Taxable income for personal income tax includes the following types of income, excluding tax-exempt income as prescribed in Article 4 of this Law:

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6. Income from winnings, including:

a) Lottery winnings;

b) Winnings from promotional activities;

c) Winnings from betting activities;

d) Winnings from games, contests with prizes, and other forms of winnings.

According to the above regulation, lottery winnings are one of the types of taxable income for personal income tax.

How much incomes from lottery winnings shall be taxable? How to calculate PIT for income from lottery winnings in Vietnam? (Image from the Internet)

Vietnam: How much incomes from lottery winnings shall be taxable?

Based on Clause 1, Article 15 of Circular 111/2013/TT-BTC, the basis for calculating tax on winnings for resident individuals is specified as follows:

Basis for Calculating Tax on Winnings

The basis for calculating tax on winnings is the taxable income and tax rate.

1. Taxable Income

Taxable income from winnings is the portion of the prize value that exceeds 10 million VND received by the taxpayer for each winning occasion regardless of the number of times prizes are received.

In case of one prize with multiple winners, the taxable income is divided among the prize recipients. Winners must present legal grounds. If there is no legal basis, the winning income is attributed to one individual. If an individual wins multiple prizes in one event, taxable income is calculated based on the total value of the prizes.

Taxable income for some prize games. To be specific:

a) For lottery winnings, it is the total prize value exceeding 10 million VND per lottery ticket received in a draw period, without any deductions.

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According to Point a, Clause 2, Article 23 of Circular 111/2013/TT-BTC:

For Income from Winnings, Inheritance, Gifts

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2. Taxable Income

a) Taxable income from winnings for non-resident individuals is the portion of prize values exceeding 10 million VND per winning occasion in Vietnam.

Income from winnings for non-resident individuals is determined as for resident individuals as guided in Clause 1, Article 15 of this Circular.

According to the stated regulations, individuals must pay personal income tax on winnings when the prize value exceeds 10 million VND per winning occasion. To be specific:

- For resident individuals, taxable income is the total prize value exceeding 10 million VND per lottery ticket received in a draw.

- For non-resident individuals:

+ The taxable income is also the prize value portion exceeding 10 million VND per winning occasion in Vietnam.

+ This regulation is applied similarly to resident individuals.

Note: For lottery tickets, taxable income is the total prize value exceeding 10 million VND per ticket in a draw period, without any cost deductions.

If an individual wins multiple prizes in one event, the taxable income is calculated based on the total value of prizes.

In summary, individuals must pay personal income tax when the prize value from lottery winnings exceeds 10 million VND in one winning occasion.

How to calculate PIT for income from lottery winnings in Vietnam?

According to Article 15 of Circular 111/2013/TT-BTC, the personal income tax rate for income from winnings applies the full tax schedule with a tax rate of 10%. Thus, the method to calculate PIT for income from lottery winnings is as follows:

- If the prize value ≤ 10 million VND: No tax is payable.

- If the prize value > 10 million VND:

Personal Income Tax payable = (Prize Value - 10 million) × 10%.

The time to determine taxable income for winnings is when the organization or individual pays the prize to the winner.

Simultaneously, according to Point g, Clause 1, Article 25 of Circular 111/2013/TT-BTC, the organization paying the prize is responsible for withholding personal income tax before paying the prize to the winner. This means the lottery company will automatically deduct tax at the source before prize distribution.

* Illustration Example:

- If a lottery ticket wins 9 million VND per ticket: No tax is payable.

- If a lottery ticket wins 15 million VND per ticket:

+ Taxable income = 15 million - 10 million = 5 million VND.

+ Tax payable = 5 million × 10% = 500,000 VND.