How to determine taxable income for promotional winnings in Vietnam?
What types of winnings are subject to personal income tax in Vietnam?
Pursuant to Clause 6, Article 3 of the Law on Personal Income Tax 2007 as amended by Clause 2, Article 2 of the Law on Amending Laws on Tax 2014, Income from winning prizes includes:
- Lottery winnings;
- Prizes from promotional activities;
- Prizes from betting games;
- Winnings from games, contests with prizes, and other forms of winning.
Thus, the aforementioned prizes fall under the category of income subject to personal income tax, which includes prizes from promotional activities.
How to determine taxable income for promotional winnings in Vietnam? (Image from the Internet)
How to determine taxable income for promotional winnings in Vietnam?
According to Clause 1, Article 15 of Circular 111/2013/TT-BTC, the regulation is as follows:
Basis for tax calculation on income from winnings
The basis for tax calculation on income from winnings is taxable income and the tax rate.
1. Taxable income
Taxable income from winnings is the portion of the prize value exceeding 10 million VND that the taxpayer receives for each winning occurrence, irrespective of the number of prize receipts.
If a prize is won by multiple people, taxable income is allocated to each prize recipient. The winner must provide legal grounds for evidence. In the absence of legal evidence, the winning income is attributed to one individual. If an individual wins multiple prizes in one game, taxable income is determined based on the total value of all prizes.
Taxable income for some prize games is as follows:
a) For lottery winnings, it is the entire prize value exceeding 10 million VND per lottery ticket received in one draw, not deducting any costs.
b) For promotional prizes awarded in kind, it is the value of the promotional product exceeding 10 million VND, converted to cash at market value at the time of receiving the prize, not deducting any costs.
According to the above provision, taxable personal income is the portion of the prize value from promotions exceeding 10 million VND for each winning occurrence.
If a prize is distributed among multiple people, the taxable income will be proportioned accordingly and must have legal grounds for evidence. In the absence of evidence, the entire prize is allocated to one individual.
For promotional winnings awarded in kind, taxable income is determined as the product's value exceeding 10 million VND converted into cash at market value at the time of prize receipt without deducting any costs.
Example:
If winning a motorbike valued at 30 million VND in a promotional event:
Taxable income = 30 million - 10 million = 20 million VND.
The above regulation applies to resident individuals. Non-resident individuals follow Clause 2, Article 23 of Circular 111/2013/TT-BTC as follows:
For income from winnings, inheritance, gifts
...
2. Taxable income
a) Taxable income from winnings of non-resident individuals is the portion of the prize value exceeding 10 million VND per winning instance in Vietnam.
Income from winnings for non-resident individuals is determined as for resident individuals according to the guidance in Clause 1, Article 15 of this Circular.
b) Taxable income from inheritances and gifts for non-resident individuals is the portion of inherited property, gift value exceeding 10 million VND per income occurrence received in Vietnam.
Income from inheritances and gifts for non-resident individuals is determined as per resident individuals according to the guidance in Clause 1, Article 16 of this Circular.
Accordingly, the taxable income from winnings of non-residential individuals is the portion of the prize value exceeding 10 million VND per winning instance in Vietnam. Taxable income determination is similar to that of resident individuals.
How to calculate personal income tax on promotional winnings in Vietnam?
Also, according to the provisions of Article 15 of Circular 111/2013/TT-BTC, the basis for tax calculation on income from winnings is taxable income and the tax rate.
The personal income tax rate applicable to income from winnings is applied according to the full tax rate schedule at 10%.
The calculation of personal income tax is performed according to the formula:
Payable Personal Income Tax = Taxable Income x Tax Rate 10%
The timing to determine taxable income for income from promotional winnings is when the organization or individual organizing the promotional activity pays the prize to the winner.
Example:
- In the case of winning cash:
A participant wins 20 million VND in a promotional program.
+ Taxable income = 20 million - 10 million = 10 million VND.
+ Personal Income Tax = 10 million × 10% = 1 million VND.
- In the case of winning in kind:
A participant wins a mobile phone valued at 25 million VND.
+ Taxable income = 25 million - 10 million = 15 million VND.
+ Personal Income Tax = 15 million × 10% = 1.5 million VND.
