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1 Organising a promotional lottery – what do you need to know? What are promotional lotteries?
1.1 Who are these promotional lotteries aimed at?
1.2 How do you organise a promotional prize draw?
1.3 Is a promotional lottery subject to gambling tax?
1.4 The obligations of the organiser of a promotional lottery (a business) under the Personal Income Tax Act

Promotional prize draws These are games in which you can take part after purchasing a product, service or other proof of entry. In this way, you take part in the lottery free of charge and gain the chance to win prizes in kind or cash.

Organising a promotional lottery – what do you need to know? What are promotional lotteries?

Promotional lotteries are games of chance open to anyone aged thirteen or over. To take part, participants must purchase the promoted product or service, or provide another form of proof of entry (e.g. a ticket to an event). Winners of cash or non-cash prizes are selected by a draw. Organisers usually run such campaigns to boost sales of the promoted products and services.

The rules governing the organisation of such lotteries are set out in the Act of 19 November 2009 on gambling (Journal of Laws of 2020, item 2094). Promotional lotteries, as well as audiotext and raffle lotteries, are fully compliant with Polish law. Lotteries and other types of schemes (listed in Article 2 of the Act) are collectively classified as games of chance. Together with pari-mutuel betting, card games and slot machines, they form part of the category of gambling.

Who are these promotional lotteries aimed at?

Individuals aged 13 or over may take part in promotional lotteries. This is in accordance with the provision set out in Article 27(2) of the Act: „Only persons who have reached the age of 18 may take part in games of chance, with the exception of raffles and promotional lotteries”. The age limit of 13 refers to the Civil Code – as it is at this age that a person acquires limited legal capacity.

How do you organise a promotional prize draw?

Organising a promotional lottery involves a number of administrative procedures. Such proceedings are conducted before the Director of the Tax Administration Chamber, the Head of the Customs and Tax Office, and the Head of the Tax Office (with jurisdiction over the organiser’s registered office – in the case of nationwide lotteries – or over the location where the lottery is held – where the lottery takes place within a single province).

The most important tasks to be carried out include:

  • Drawing up the exact wording of the lottery rules (in accordance with Article 60(1) of the Act);
  • Obtaining a bank guarantee for the payment of prizes (in accordance with section 66(1) of the Act);
  • Submission of an application for a licence to organise a lottery (no later than 2 months before the start – in accordance with Article 39a of the Act);
  • Payment of the fee for the issue of a licence to the account of the Tax Office in Nowy Targ (in accordance with Article 68(1)(1) of the Act and paragraph 2(3)(r)), the Notice of the Minister of Development and Finance of 20 June 2017 on the list of bank account numbers of tax offices (Official Journal of the Minister of Development and Finance, 2017, item 123) and the Regulation of the Minister of Development and Finance of 22 February 2017 on the jurisdiction of tax offices and tax administration chambers in relation to gambling tax (Journal of Laws 2017, item 370);
  • Notification of the commencement of operations to the Director of the Tax Administration Chamber who issues the decision authorising the organisation of a lottery (in accordance with Article 49a of the Act);
  • Notification to the competent Head of the Customs and Tax Office of activities subject to customs and tax control, and submission of confirmation that the conditions and resources necessary for carrying out such control are in place (in accordance with paragraph 12.1 of the Regulation of the Minister of Development and Finance of 24 February 2017 on customs and tax inspections carried out in relation to the organisation and operation of gambling (Journal of Laws 2017, item 438) and Article 74(2)(5) of the Act of 16 November 2016 on the National Tax Administration (Journal of Laws 2018, item 508);
  • Preparation and provision of records of prizes awarded with a value of at least 2,280 zł, as well as the submission of records of prize certificates for the purpose of certifying the records by sealing them with an official seal (In accordance with the Regulation of the Minister of Development and Finance of 24 February 2017 on customs and tax inspections carried out in relation to the organisation and operation of games of chance (Journal of Laws 2017, item 438) in conjunction with Article 20(3) and Article 20(5) of the Act in conjunction with paragraph 6(2) of the Regulation of the Minister of Finance of 22 June 2010 on certificates of winnings and the register of certificates and the register of winnings paid out (Journal of Laws 2017, item 1723);
  • Delivering training on the legislation relating to gambling and the rules of the lottery being organised (in accordance with Article 24b of the Act);
  • Preparation of certificates confirming winnings (in accordance with Article 20(4) of the Act, read in conjunction with paragraph 1 of the Regulation of the Minister of Development and Finance of 22 February 2017 on the designation of the head of the tax office competent to issue forms for certificates of winnings (Journal of Laws 2017, item 362);
  • Maintaining a register of employees’ certificates, which must include, amongst other things: the employee’s details, the date of the training, the details of the issuing body and the certificate number (in accordance with Article 24b(3) of the Act);
  • Notifying the Head of the Customs and Tax Office of the start of the lottery on the day it begins;
  • The appointment of the Lottery Supervisory Commission, the adoption of its rules of procedure, and the archiving of members’ declarations of consent to participate in its work;
  • Issuing, at the request of Participants, personalised certificates confirming the prizes they have won (in accordance with Article 20 of the Act);
  • Submission of the register of certificates to the relevant Head of the Tax Office for the purpose of closing the register, immediately after the end of the calendar year. The same procedure applies to the register of winnings issued (in accordance with paragraph 7(1) of the Regulation of the Minister of Finance of 22 June 2010 on certificates of winnings and the register of certificates and the register of winnings paid out (issued) (Journal of Laws 2017, item 1723) and the Regulation of the Minister of Finance of 7 December 2018 amending the Regulation on certificates of winnings and the records of such certificates and of winnings paid out (Journal of Laws of 2018, item 2325);
  • Submission to the Head of the Customs and Tax Office of information regarding the lottery held, within 30 days of its conclusion (in accordance with paragraph 21 of the Regulation of the Minister of Development and Finance of 24 February 2017 on customs and tax controls carried out in relation to the organisation and operation of games of chance (Journal of Laws 2017, item 438));

This list of obligations applies to the operator of a gaming machine, in accordance with the provisions of the Regulation of the Minister of Development and Finance of 8 June 2017 on lottery machines, gaming machines and slot machines, the protection of information relating to the lottery being organised and the collection, calculation and payment of winnings (Journal of Laws 2017, item 1171), to which paragraph 7(2) of the Regulation of the Minister of Finance of 22June 2010 on certificates of winnings and the records of such certificates and of winnings paid out (issued) (Journal of Laws 2017, item 1723). However, these provisions apply to a situation where, following the conclusion of the lottery, the organiser „does not cease to carry out activities related to games of chance”, i.e. simply plans to organise further such events.

Is a promotional lottery subject to gambling tax?

In accordance with Article 71(1) of the Gambling Act, a taxpayer is defined as a natural or legal person, or an organisational unit without legal personality, which organises games of chance on the basis of a licence/authorisation, as well as an entity organising events covered by a state monopoly and a participant in a poker tournament organised by an entity holding a licence to operate a casino.

The organisation of a promotional lottery is exempt from tax by law, given its nature (Article 71(2)(1) of the Gambling Act). According to an individual interpretation issued by the Director of the Tax Chamber in Warsaw on 30 October 2012 (IPPP2/443-940/12-2/MM), such campaigns are intended to serve marketing purposes. Their aim is to promote products and services, boost sales and increase the company’s and brand’s recognition. Participation in such a lottery is free of charge; therefore, the organiser does not generate any revenue, which means there is no basis for taxation.

The obligations of the organiser of a promotional lottery (a business) under the Personal Income Tax Act

According to the individual ruling of the Director of the Tax Chamber in Warsaw (dated 29 July 2011, IPPB1/415-528/11-2/EC), income from prizes awarded to winners of promotional lotteries must be subject to a flat-rate income tax under 10%, in accordance with Article 30(1)(2) of the Personal Income Tax Act. The tax rate is set out in Article 30(1)(2) of the Personal Income Tax Act (Journal of Laws 2018.200, consolidated text of 24 January 2018, hereinafter: the PIT Act).

Payers of the 10% flat-rate income tax may be natural persons carrying on a business, legal persons and their organisational units, and organisational units without legal personality (acting as lottery organisers).

In accordance with Article 41(4) of the PIT Act, such organisers of promotional lotteries are obliged to deduct a flat-rate income tax from payments made or from money/monetary values made available to the taxpayer on the grounds specified in Article 29, Article 30(1)(2), (4)-(5a) and (13), and Article 30a(1), subject to paragraph 5.

Where the prize awarded by the lottery organiser is not in the form of money, the taxpayer (the winning participant) is obliged to pay the organiser an advance payment or the flat-rate tax due before receiving the prize or benefits.

This means that if a cash prize is won in a lottery, the winner will only receive it after an amount of 10% has been deducted, which will be allocated towards a flat-rate income tax. If, on the other hand, they win a non-cash prize, they must pay the organiser a sum equal to 10% of the prize’s value – that is, an amount corresponding to the flat-rate tax – before receiving the prize.