Taxation of prizes for downloading applications in Personal Income Tax

The Dirección General de Tributos (DGT) has issued a relevant ruling regarding the tax nature of prizes awarded in sweepstakes where the condition for participation is the downloading of a mobile application. This resolution clarifies the classification of these benefits and the withholding obligations that fall upon the promoting entities.

What the DGT has ruled

The inquiry analyzes the taxation in Personal Income Tax (IRPF) of prizes derived from this type of dynamic. The DGT establishes that, as they are linked to the private sphere of the participants, these prizes are classified as capital gains, in accordance with Article 33.1 of Law 35/2006.

Regarding the collection mechanics, the criteria point out that these prizes are subject to withholding or payment on account according to Article 75.2.c of the Tax Regulations. There are two exceptions to this withholding obligation:

• When they involve games regulated by Royal Decree-Law 16/1977.
• When the withholding base is less than 300 euros.

Furthermore, the resolution specifies that if the prize is delivered in kind, the withholding base must be calculated by increasing the acquisition or cost value for the payer by 20 percent.

What it means for you

The impact of this resolution is divided according to the profile of the party involved:

• For individuals: The prize winner is obliged to include the value of the prize as a capital gain in their income tax return.
• For companies: The entity promoting the sweepstakes assumes the responsibility of applying the corresponding withholding or payment on account on the prizes it delivers.

What should be done

When implementing marketing campaigns based on application downloads, it is necessary to verify the nature of the prizes and ensure that the withholding calculation is correct, especially for deliveries in kind. It is recommended to assess each particular situation to determine whether withholding thresholds are met or if the sweepstakes falls under the regulations for regulated games.