How to calculate personal income tax on winning prizes in Vietnam?

What types of income from winning prizes are personal income taxable income in Vietnam?

According to Clause 6, Article 2 of Circular 111/2013/TT-BTC, amended by Clause 7, Article 25 of Circular 92/2015/TT-BTC, income from winning prizes includes amounts of money or in-kind prizes received by individuals in the following forms:

- Winning in lotteries issued and rewarded by lottery companies.

- Winning in promotional activities when participating in the purchase and sale of goods and services as regulated by the Commercial Law.

- Winning in betting forms or wagers as permitted by the law.

- Winning in games, contests with prizes, and other forms of winnings organized by economic organizations, administrative agencies, professional organizations, associations, and other organizations and individuals.

What types of income from winning prizes are personal income taxable income in Vietnam? (Image from the Internet)

How to calculate personal income tax on winning prizes for resident individuals in Vietnam?

According to Article 15 of Circular 111/2013/TT-BTC, as amended by Article 18 of Circular 92/2015/TT-BTC, the calculation of personal income tax on winning prizes for resident individuals is as follows:

Personal income tax payable = Taxable income x Tax rate

Where:

* Taxable income:

Taxable income from winning prizes is the value of the prize exceeding VND 10 million that the taxpayer receives for each winning, regardless of the number of times the prize money is received.

In case a prize is won by multiple people, the taxable income is divided among the prize recipients. Each winner must provide legal supporting documents. If there are no legal supporting documents, the taxable income is attributed to one individual. If an individual wins multiple prizes in one event, the taxable income is calculated on the total value of all prizes.

Taxable income for certain games and prizes is as follows:

- For winning prizes, it is the entire value of the prize exceeding VND 10 million per lottery ticket received in one draw, without deducting any expenses.

- For promotional prizes in-kind, it is the value of the promotional product exceeding VND 10 million, converted to money at market prices at the time of receiving the prize, without deducting any expenses.

- For betting or wagering winnings, it is the entire value of the prize exceeding VND 10 million that the participant receives, without deducting any expenses.

- For game or contest winnings, it is calculated per prize claim. The prize value is the entire prize amount exceeding VND 10 million that the winner receives, without deducting any expenses.

* Tax rate:

The personal income tax rate for winning prizes is applied at a whole tax rate of 10%.

* Time of determining taxable income:

The time of determining taxable income from winning prizes is the time when the organization or individual pays the prize to the winner.

How to calculate personal income tax on winning prizes for non-resident individuals in Vietnam?

According to Article 23 of Circular 111/2013/TT-BTC, the calculation of personal income tax on winning prizes for non-resident individuals is as follows:

- Personal income tax on winning prizes for non-resident individuals is determined by taxable income multiplied (×) by the tax rate of 10%.

- Taxable income from winning prizes for non-resident individuals is the value of the prize exceeding VND 10 million per winning in Vietnam.

The taxable income from winning prizes for non-resident individuals is determined similarly to resident individuals as guided in Clause 1, Article 15 of Circular 111/2013/TT-BTC.

- Time of determining taxable income from winning prizes: the time of determining taxable income is when the organization or individual in Vietnam pays the prize to the non-resident individual.

How to distinguish between resident and non-resident individuals in Vietnam?

Based on Clauses 1 and 2, Article 1 of Circular 111/2013/TT-BTC, resident and non-resident individuals are defined as follows:

* Resident individual is someone who meets either of the following conditions:

- Present in Vietnam for 183 days or more within a calendar year or 12 consecutive months from the first day of presence in Vietnam, where both the day of arrival and the day of departure count as one (01) day. The arrival and departure dates are based on the immigration certification on the individual's passport (or laissez-passer) when entering and leaving Vietnam. If one enters and exits on the same day, it is counted as one day of residence.

An individual present in Vietnam is considered to be physically present on Vietnamese territory.

- Has a permanent residence in Vietnam in one of the following cases:

+ Having a permanent residence as regulated by the law on residence:

++ For Vietnamese citizens: a permanent residence is where an individual resides regularly, stably without a time limit at a specific location, and has registered permanent residence as prescribed by the law on residence.

++ For foreigners: a permanent residence is the residence recorded in the Permanent Resident Card or a temporary residence when registering for a Temporary Resident Card issued by the competent authorities of the Ministry of Public Security.

+ Renting a house in Vietnam as regulated by the law on housing, with lease contracts of 183 days or more in the tax year. Specifically:

++ If an individual neither has nor has had a permanent residence but rents a house for a total of 183 days or more in the tax year, the individual is considered a resident, even if renting multiple residences.

++ Renting a house includes living in hotels, guest houses, inns, hostels, workplaces, headquarters, etc., regardless of whether the individual rents it themselves or the employer rents it for the employee.

In cases where an individual has a permanent residence in Vietnam as stipulated but is physically present in Vietnam for less than 183 days in the tax year and cannot prove residency in another country, the individual is considered a resident of Vietnam.

Proof of residency in another country is based on a Certificate of Residence. If the individual is from a country or territory that has signed a tax agreement with Vietnam without regulations on issuing a Certificate of Residence, a copy of the Passport should be provided to prove the duration of residence.

* Non-resident individual is someone who does not meet the conditions of a resident individual.