Individuals must pay personal income tax when receiving prizes, except for a few cases where personal income tax is exempt.

This article was consulted by Lawyer Nguyen Quang Trung

Legal grounds:

• Decree No. 65/2013/ND-CP;
• Circular No. 111/2013/TT-BTC;
• Official Dispatch No. 24601/CTHN-TTHT dated April 19, 2023 of Hanoi Tax Department.

We receive the following questions:

My company recently celebrated its 10th anniversary, so we organized a contest for employees to design the company’s new logo. The biggest prize is an iPhone and some monetary consolation prizes. I want to ask, does the company have to deduct personal income tax from employees who win this award?

Pursuant to Point đ, Clause 6, Article 2 of Circular No. 111/2013/TT-BTC as follows:

Article 2. Taxable income

6. Income from winning prizes

Income from winning prizes is money or in kind that individuals receive in the following forms:

…

đ) Winning prizes in prize-winning games, contests and other forms of prizes organized by economic organizations, administrative agencies, public service agencies, unions and other organizations and individuals.

Pursuant to Point d, Clause 1, Clause 2, 3 Article 15 of Circular No. 111/2013/TT-BTC as follows:

Article 15. Tax basis for income from winning prizes

The tax basis for income from winning prizes is taxable income and tax rate

1. Taxable income

Taxable income from winning prize is the prize value exceeding 10 million VND that the taxpayer receives for each time of winning a prize, regardless of the number of times receiving the bonus.

In case there is a prize but there are many winners, the taxable income is divided among each prize recipient. The winner must present legal proof. In case there is no legal proof, the winning income is calculated for an individual. In case an individual wins multiple prizes in one game, the taxable income is calculated on the total value of the prizes.

Taxable income for certain prize games; As follows:

…

d) For winning prizes from games, competitions with prizes are calculated according to each time the prize is received. The prizes value is equal to the entire prizes amount exceeding 10 million VND that the player receives, without deducting any expenses.

2. Personal income tax rate for income from winning prizes is applied according to the Full Tax Schedule with a tax rate of 10%.

3. Time to determine taxable income

The time to determine taxable income for income from winning prizes is the time the organization or individual pays the prize to the winner.

According to the above regulations:

• Employees who receive prizes in kind or money for participating in prize-winning contests organized by the company are determined to be income from winning prizes.
• If the prize is worth more than 10 million VND, the company will deduct personal income tax before paying the reward to the individual.

Note: based on point e, Clause 2, Article 3 of Decree No. 65/2013/ND-CP, only the following bonuses are determined not to be income subject to personal income tax:

• Bonuses accompanying titles conferred by the State, including bonuses accompanying emulation titles, forms of reward according to the provisions of law on emulation and commendation;
• Bonuses accompanying national awards and international awards recognized by the State of Vietnam;
• Bonuses for technical improvements, inventions, and inventions recognized by competent state agencies;
• Bonuses for detecting and reporting violations of law to competent state agencies.

Thus, only bonuses due to titles or achievements recognized by State agencies are not subject to personal income tax.