Year-end or New Year parties are occasions for businesses to show appreciation to their employees. Among these, prize draws are always a highlight. However, determining the tax obligations associated with these prizes often causes confusion for the accounting department.
Based on Official Letter No. 624/CTDON-QLDN1 issued on January 12, 2026, by the Dong Nai Provincial Tax Department, this article will clarify the method of calculating personal income tax and the conditions for deducting corporate income tax for these prize winnings.
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Personal Income Tax (PIT) on income from lottery winnings.
According to the Dong Nai Provincial Tax Department, income received by employees from lucky draws at year-end/new year parties is classified as prize money income, not salary or wage income.
Legal basis:
- Article 15 of Circular 111/2013/TT-BTC: Regulations on the basis for calculating tax on income from lottery winnings.
- Point g, Clause 1, Article 25 of Circular 111/2013/TT-BTC: Regulations on the responsibility of the paying organization to deduct tax.
How to determine taxable income
Personal income tax only arises when the prize value exceeds a certain threshold. Specifically:
- Tax threshold: The portion of the prize value exceeding 10 million VND per win.
- Tax rate: 10%.
Tax calculation formula:
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Personal income tax payable = (Prize value – 10,000,000) x 10% |
For example: At the year-end party, Mr. Nguyen Van A won the grand prize: an electric motorbike worth 25,000,000 VND.
- Taxable income: 25,000,000 – 10,000,000 = 15,000,000 VND.
- Mr. A's personal income tax payable: 15,000,000 × 10% = 1,500,000 VND.
Corporate responsibility
Businesses are responsible for deducting personal income tax before awarding bonuses to employees. This means that if the bonus is in cash, the business deducts it directly; if it is in kind, the employee must pay the tax to the company before receiving the gift, or the company may agree to pay it on their behalf (this amount will be included in the employee's income if agreed upon).
Corporate Income Tax (CIT) – Deductible Expenses
Are expenses incurred for purchasing raffle prizes considered deductible expenses when calculating corporate income tax?
According to Official Letter No. 624/CTDON-QLDN1, these expenses, if they meet the conditions in Article 9 of Decree 320/2025/ND-CP (issued on December 15, 2025), are deductible expenses.
Decree 320/2025/ND-CP continues the spirit of previous documents but provides more specific guidance on expenditures that are of a direct welfare nature for employees.
Conditions for an expense to be considered reasonable.
To avoid having expenses disallowed during tax settlement, businesses need to prepare a supporting set of documents including:
- Internal regulations: Expenses for prize draws must be specifically stated in the Financial Regulations, Collective Labor Agreement, or Employment Contract.
- Decision to organize: Document approving the year-end/new year party program, clearly stating the prize structure.
- Invoices and supporting documents: Valid invoices for the purchase of gifts (for in-kind gifts) or payment vouchers.
- Award Ceremony Record: A list of winning employees with the recipient's signature confirming receipt.
- Tax payment documents: Personal income tax deduction certificate (for prizes exceeding 10 million VND).
Distinguishing between "Winning a prize" and "Reward"
This is the most common mistake.
- Winning Prize (Lucky Draw): Tax rate 10% for amounts exceeding 10 million. Applicable to lottery draws.
- KPI/Performance Bonus (Salary): Added to monthly income and calculated according to the progressive tax rate (5% to 35%). If the accountant confuses these two types, the risk of tax arrears is very high.
Note regarding outgoing invoices: When a business purchases goods to use as prizes for employees, it must issue an output invoice (as stipulated in Clause 7, Article 3 of Circular 26/2015/TT-BTC on gifts and donations). The taxable price is the selling price of similar or equivalent goods and services at the time the activity occurs.
Business summary table
To help accounting departments and management gain a quick overview of relevant tax obligations, below is a summary of core regulations based on Circular 624/CTDON-QLDN1 and Decree 320/2025/ND-CP:
| Content | Regulations | Note |
| Type of personal income | Income from lottery winnings | Applying Article 15 of Circular 111/2013/TT-BTC |
| Personal income tax exemption level | 10,000,000 VND | Calculated per win. |
| Personal income tax rate | 10% | Calculated based on the amount exceeding 10,000,000 VND. |
| Corporate Income Tax | Included in deductible expenses. | According to Article 9 of Decree 320/2025/ND-CP |
| Time of deduction | Before paying out the prize | Businesses are responsible for filing declarations. |
Based on the table above, businesses can proactively develop reward plans and prepare financial resources to fulfill their tax obligations on time.
Conclude
Strict adherence to the regulations outlined in Official Letter 624/CTDON-QLDN1 not only helps employees understand their rights and obligations but also enables businesses to legally optimize corporate income tax costs.
In 2026, with the promulgation of Decree 320/2025/ND-CP, businesses need to review their financial regulations to ensure that welfare expenses and year-end bonuses are fully recorded, avoiding future tax risks.
Contact information MAN – Master Accountant Network
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Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
