Expenses deductible from corporate income tax of the lottery enterprise in Vietnam

Expenses deductible from corporate income tax of the lottery enterprise in Vietnam (Internet image) 

1. Revenues earned by a lottery enterprise in Vietnam

According to Clause 1, Article 4 of Decree 122/2017/ND-CP, revenues earned by a lottery enterprise in Vietnam include:

- Revenues from licensed lottery operations;

- Revenues from other business operations;

- Revenue from financial incomes as regulated by law;

- Other income.

2. Expenses that are deductible from corporate income tax of lottery companies in Vietnam

Specifically, in Article 5 of Decree 122/2017/ND-CP, when making declaration of the corporate income tax, the lottery enterprise in Vietnam may record the following expenses as its deductible expenses:

(1) Prize expenses:

- Prize expenses incurred in course of launching traditional lottery products, lotto games and instant games shall be the amounts actually paid to winners who have winning tickets in accordance with regulations of law.

With respect to traditional lottery products launched under the cooperation mechanism for lottery issuance, prize expenses include:

= Prize amounts actually paid out to winners by a lottery enterprise itself as provided for in the Regulation on operation of the Regional Lottery Council;

= An amount of prize payouts which must be paid by the lottery enterprise according to a payment percentage set forth to winners who present winning tickets for which the payment is jointly made by the lottery enterprise and the Regional Lottery Council in accordance with the said Regulation on operation of the Regional Lottery Council.

- Prize expenses incurred in course of launching computerized lottery products shall be the amounts actually paid to winners and the accumulated value of prize money rolled over to the next drawing, if no one wins in the draw, as provided for in the Game Rule in accordance with regulations of the Law on Lottery Business.

(2) Agent commissions:

- Agent commission is the amount paid to a lottery agent by the lottery enterprise in return for selling lottery tickets.

- Ministry of Finance of Vietnam shall stipulate specific rate of commission paid to lottery agents set forth in this clause in each period.

- The commission rate must be specified in the lottery sales agent agreement signed by and between the lottery enterprise and a lottery agent.

- The lottery enterprise shall pay commission to a lottery agent after the number of lottery tickets sold out by such agent in the period has been verified and such agent has fulfilled all economic obligations specified in the signed lottery sales agent agreement.

- Before paying commission to a lottery agent, the lottery enterprise shall deduct the tax amount to be paid by such agent in accordance with regulations of the Law on Taxation.

(3) Fees of authorization for payment to prize winners

- Ministry of Finance shall stipulate specific fees paid to lottery agents authorized to make payments to prize winners as set forth in this clause in each period.

- Authorization fee shall be paid according to the lottery sales agent agreement signed by and between the lottery enterprise and a lottery agent which includes a clause on authorization for payment to prize winners and other documents proving that such lottery agent has made payments to prize winners.

- The lottery agent authorized to make payments to prize winners is not allowed to collect any fees from such prize winners.

(4) Drawing cost and supervisory fee:

- Drawing cost includes the cost of leasing hall for organize drawing activities and costs of other equipment/services purchased or leased to conduct a draw.

In case of cooperation in lottery issuance, all participating lottery enterprises shall together conduct a draw, the cost of such lottery draw incurred by each lottery enterprise shall be determined according to the ratio of quantity of lottery tickets received for sale by such lottery enterprise to the total quantity of tickets of an issuance." Determination of drawing cost incurred by each lottery enterprise is specified in the Regulation on operation of the Regional Lottery Council.

- Payment of remunerations to members of the lottery supervision council shall depend on the approval by the representative agency of state capital owner according to the request by the lottery enterprise.  Determination of such remunerations shall apply the principle of economy and efficiency in conformity with duties of each member so as to emphasize his/her responsibility to fulfill supervisory duties.

(5) Contributions towards preventing illegal numbers game and issuance of fake lottery tickets:

- Contribution principle:

= Contributions shall be directly made to police authorities and relevant agencies in local area or in the administrative location where business activities are carried out so as to conduct investigation and handling of cases of illegal numbers game and issuance of fake lottery tickets.

= Each lottery enterprise shall make contributions according to its financial capacity.

= Contributions are proved by legal invoices/vouchers issued in accordance with regulations of law.

= Contributions shall be made according to copies of judgments issued by people’s courts, decisions on filling a lawsuit or decisions on imposition of administrative penalties and receipts of fine payment.

= Police authorities and relevant agencies shall openly and transparently allocate the received contributions to units and individuals having good performance according to the complexity of each case, number of participants in investigation and investigation period.

- Ministry of Finance shall stipulate specific limits of contributions towards preventing illegal numbers game and issuance of fake lottery tickets in each period in accordance with regulations herein.

- Based on the reality and contribution limits prescribed in this clause, the lottery enterprise shall request the representative agency of state capital owner to consider giving approval for specific contents and contributions.

(6) Contributions to prize reserve fund:

- Principles for setting aside the prize reserve fund:

= A lottery enterprise is allowed to set aside the prize reserve fund only when launching licensed lottery products according to the fixed pay-out method in compliance with regulations of the Law on Lottery Business.

= When setting up the prize reserve, the lottery enterprise must not incur loss and have the actual payout smaller than the planned payout as regulated by the Law on Lottery Business. Actual payout in the period is determined by adopting the following formula:

Total taxable revenue of Vietlott in the period shall exclude receipts from sale of lottery tickets in previous periods when drawing is not yet conducted.

= At the time of setting aside the prize reserve, total balance of the prize reserve fund of a lottery enterprise in the Northern or Central region shall not exceed 10% of total taxable revenue from all licensed lottery types, and that of a lottery enterprise in Southern region or Vietlott shall not exceed 3% of the same.

- The prize reserve for each lottery type is determined by adopting the following formula:

- The lottery enterprise is allowed to provisionally set aside the prize reserve on a quarterly basis and record such reserve in accounts at the end of the fiscal year if it satisfies the requirements in Point a of this Clause

- The lottery enterprise may use the prize reserve fund to pay out prizes if the actual payout is greater than the planned payout in the period. In case the balance of the prize reserve fund is not enough to pay prize amounts to all winners, the deficit shall be recorded as operating expenses.

Ending balance of the prize reserve fund shall be carried forward to the previous year. If the balance of the prize reserve fund set up in the period by a lottery enterprise exceeds the limit prescribed in Point a of this Clause, the difference must be reserved to “other incomes” account.

(7) Lottery ticket expenses:

- Cost of printing lottery tickets as the actual amounts paid to the printing facility, costs of transport, loading/unloading and storage, and surcharges (if any) or payments for printing lottery tickets of each issuance in accordance with regulations of the Regional Lottery Council on the basis of the economic contract signed by and between the lottery enterprise and printing facility.

- Cost of printing betting slips, buying printing paper, printing inks and other expenses incurred in course of launching computerized lottery products according to economic contracts signed between the lottery enterprise and relevant service providers. 

- If a lottery enterprise prints lottery tickets itself, cost of printing lottery tickets shall be reasonable expenses actually incurred and recorded as its general administration expenses.

(8) Costs of providing information about lottery tickets, draws and drawing results:

- Costs of providing information about lottery tickets, draws and drawing results are amounts paid for relevant units providing information about drawing results on radio stations, television channels and other means of mass media, cost of printing pamphlets providing payout rules and drawing results for players and lottery agents.

- These costs are paid according to economic contracts, valid invoices and vouchers as regulated by the Law on Taxation.

(9) Contributions towards maintaining operation of the Regional Lottery Council:

- Ministry of Finance shall stipulate specific limits of contributions towards maintaining operation of the Regional Lottery Council as mentioned in this Clause in each period.

- Any expenses paid must have valid vouchers. In case the Regional Lottery Council itself takes charge of spend management, spending limits must be approved by the Council. Chairperson of the Regional Lottery Council shall be legally responsible for the legality and validity of spending items. Ending a fiscal year, these operating expenses must be recorded into accounts so as to disclose before the Regional Lottery Council.

Ending balance shall be carried forward to the following year to use for proper purposes.

Thanh Rin

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