Every second brand conducts giveaways to boost engagement. But is a gifted iPhone considered income for the winner? Will the tax authorities come after the organizer?
The short answer: Yes, giveaways are legal, but there are financial nuances. In this article, we will break down the legislation regarding promotional events, taxes on gifts, and how to conduct a contest without incurring penalties.
Legal tip: The main protection for the organizer is transparency. To avoid questions about fairness from participants and authorities, choose the winner through independent services. 👉 Transparent winner selection with SOM
1. Is it a Lottery or a Promotional Event?
This is the most important legal point.
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Lottery — a game where a participant pays money (buys a ticket) for a chance to win. A government license is required for this (which is very difficult to obtain).
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Promotional Event (Giveaway) — an event where participation is free (like, comment, subscribe), and the goal is to promote a product or brand.
Conclusion: If you do not charge for participation, you do not need a license from the State Lottery or other operators. You are conducting a marketing campaign.
2. Taxes on Prizes in 2026
According to the Tax Code, any gift is considered income for the individual. And income is subject to taxation.
If you (an individual entrepreneur or a company) give a prize to a follower, you become a tax agent. This means that you are responsible for paying taxes to the budget on behalf of the winner.
Tax Rates on Winnings:
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PIT (Personal Income Tax): 18%
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Military Tax: 1.5% (or the applicable rate at the time, which may change to 5% in 2025-2026, so stay tuned for updates).
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Total: You need to pay ~19.5% of the prize's value.
Example: If you are giving away a phone worth 40,000 UAH, you will need to pay approximately 7,800 UAH in taxes to the state.
3. Hack: When You Don't Have to Pay Taxes?
There is a legal way to avoid paying taxes on small gifts. According to paragraph 165.1.39 of the Tax Code, the value of gifts is not included in taxable income if it does not exceed 25% of the minimum wage (established on January 1 of the reporting year).
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If the prize is below this limit — you don't have to pay taxes (and reporting in form 4DF is not always necessary).
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If the prize is above this limit — tax is paid on the full value of the prize.
What to do if the prize is expensive? Most bloggers and Instagram shops give away prizes "from individual to individual" (just send them by mail). This is a "grey" area. But if you are a large brand and want to do everything "legally," it’s better to handle it officially and pay 19.5%, incorporating it into your marketing budget.
4. Cash or Goods: What's Better to Give Away?
From a legal standpoint, cash prizes are always taxed (with no exceptions regarding the 25% minimum). Therefore, it’s more beneficial for businesses to give away goods rather than transferring cash.
Additionally, Meta (Instagram/Facebook) often blocks content featuring images of cash, considering it fraud (scam).
5. How to Protect Yourself from Accusations?
Besides tax issues, there’s another risk — complaints from participants. If users report your post as "fraudulent," Instagram may permanently block your account.
To avoid this, follow the "Digital Footprint" rule:
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Clearly outline the terms of the promotion (you can do this in a pinned comment or in Highlights).
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Use certified services for winner selection that cannot be "manipulated".
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Keep a recording of the winner selection process.
The SOM (Social Online Manager) service creates a results page that is permanently stored. If someone accuses you of dishonesty, you can simply share the results link.
FAQ: Questions and Answers
Do I need to collect the winner's ID details?
If you are conducting the giveaway officially as an individual entrepreneur and the prize is expensive (above the 25% minimum wage limit) — yes, you need the winner's Tax ID to pay their taxes and report it.
Can I pass the tax payment responsibility to the winner?
Legally, the tax agent is the organizer (donor). You cannot force the winner to pay. However, you can verbally agree that the prize is given on the condition of tax compensation, although this can spoil the gift experience.
What happens if I don’t pay the tax?
If you’re a small blogger, the chances of an audit are low. But if you are a company, the tax authorities may see expenses for purchasing expensive equipment that then "disappeared" (was gifted) and impose penalties for non-payment of PIT.
