Complete Guide to Calculating Lottery 1st Prize Net Amount After Tax (33% on Amounts Exceeding 300 Million KRW)
If you win 2 billion KRW, how much will the tax be? The answer is 642.4 million KRW. Lottery prize money is classified as ‘other income’ and is withheld at source at rates determined by income tax law. Here’s how to accurately calculate the net amount.
Legal Basis and Tax Rates for Lottery Prize Tax
Tax on lottery prize money is imposed based on Income Tax Act Article 21 (Other Income). Lottery prize money falls under ‘other income,’ and tax amount is determined by separate taxation method without combining with other income.
Applied tax rates are as follows:
| Tax Base (Prize Money) | Tax Rate | Notes |
|---|---|---|
| 50,000 KRW or less | 0% | Tax-free |
| Over 50,000 KRW ~ up to 300 million KRW | 22% | Other income tax 20% + local income tax 2% |
| Over 300 million KRW | 33% | Other income tax 30% + local income tax 3% |
The important point is that when exceeding 300 million KRW, the 33% rate is not applied to the entire prize money, but only to the amount exceeding 300 million KRW.
Step-by-Step Net Amount Calculation Examples
Let’s look at the process of calculating tax based on actual prize money step by step.
Example 1: When Prize Money is 1 Billion KRW
- Total Prize Money: 1,000,000,000 KRW
- Tax on amount up to 300 million KRW: 300,000,000 KRW × 22% = 66,000,000 KRW
- Amount exceeding 300 million KRW: 1,000,000,000 KRW - 300,000,000 KRW = 700,000,000 KRW
- Tax on amount exceeding 300 million KRW: 700,000,000 KRW × 33% = 231,000,000 KRW
- Total Tax: 66,000,000 KRW + 231,000,000 KRW = 297,000,000 KRW
- Final Net Amount: 1,000,000,000 KRW - 297,000,000 KRW = 703,000,000 KRW
Example 2: When Prize Money is 5 Billion KRW
- Total Prize Money: 5,000,000,000 KRW
- Tax on amount up to 300 million KRW: 300,000,000 KRW × 22% = 66,000,000 KRW
- Amount exceeding 300 million KRW: 5,000,000,000 KRW - 300,000,000 KRW = 4,700,000,000 KRW
- Tax on amount exceeding 300 million KRW: 4,700,000,000 KRW × 33% = 1,551,000,000 KRW
- Total Tax: 66,000,000 KRW + 1,551,000,000 KRW = 1,617,000,000 KRW
- Final Net Amount: 5,000,000,000 KRW - 1,617,000,000 KRW = 3,383,000,000 KRW
Difference from Pension Lottery
In the case of pension lottery, the tax imposition method is different because prize money is paid in monthly installments. Pension lottery prize money is withheld at source at a single tax rate of 22% other income tax, and the progressive tax rate exceeding 300 million KRW does not apply. Therefore, if you want a long-term stable cash flow, pension lottery may be more advantageous.
Conclusion: Knowledge About Taxes is Power
Accurate understanding of taxes is essential to fully enjoy the joy of winning the lottery. When prize money exceeds 300 million KRW, a high tax rate of 33% applies, but it’s important to remember the progressive deduction method where it only applies to the excess amount.
After winning, we hope you establish a systematic asset management plan with experts based on the net amount after taxes to preserve your precious luck for a long time.