Trying to deploy an international or global sweepstakes pose a number of tax, legal, and operational issues.
Issue #1: Sweepstakes are prohibited in some countries
Sweepstakes are strictly prohibited in some countries including Sweden, India and Sweden where they considered to be equivalent to lotteries and are . Even Canada, which often is included in US promotions, technically prohibits them. The reason Canada is nevertheless included in many US sweepstakes is that the laws in Canada have been interpreted to permit promotions in which the winner is first chosen at random but then required to demonstrate a skill, such as correctly answering a math question. That is why if you read Official Rules for sweepstakes that include Canadian residents, you often see an extra requirement that Canadian winners answer a math question.
Issue #2: Many countries require localization
Some countries that permit sweepstakes and contests often require that they be conducted in a local language as is the case in Argentina, France, Mexico, and Poland. In many of these countries, you need to translate not only a promotion’s Official Rules but also all related advertisements, websites, and other collateral materials, can be cost-prohibitive and time-consuming.
Issue #3: There are tax implications associated with International prizes winners
Those countries that permit sweepstakes and contests seem to have done so as a way to generate revenue through taxation. Some countries, such as India and Norway, impose taxes on the winner of a prize (as does the US). Although the marketer may not be legally required to pay those taxes, if the marketer doesn’t pay them on behalf of the winner, the winner may end up with that responsibility. Other countries, including Brazil, Mexico, and Spain, impose taxes directly on the marketer and may even require pre-registration with local tax authorities.
Issue #5: Compliance with International promotions laws is challenging
Many countries that permit sweepstakes and contests have strict laws regarding the specific disclosures that must be made to consumers, how and where those disclosures must be made (e.g., in Official Rules or in all promotional materials), and what choices the marketer must give to consumers who are entering (e.g., what types of personal information can be shared or what uses the marketer can make of the consumers’ entries). Moreover, clauses that are common place in Official Rules in the US, such as publicity or liability releases, limitations on liability, and forum selection clauses, are often unenforceable in other countries. In some countries, marketers could be held liable for the simple act of including such clauses in the Official Rules.
Country Specific Issues
Australia: Sweepstakes are technically known as a “competition” and “trade permits” are required in many states. If the competition or contest is available to residents of New South Wales, you pay for a trade permit for a random chance draw competition. No permits are required for competitions (contests) that do not involve an element of chance (such as creative contest). Unlike in the U.S., entrants may be required to purchase a product in order to enter a trade promotion in Australia.
Canada: When running a promotion in Quebec all materials must be available in English AND French. This includes rules, promotional ads, posters, entry forms, web sites, etc. Also as part of a sweepstakes, all winners must pass a basic skill test (usually a math problem) to claim their prize. Additionally, the official rules and all promotional material must be registered with Quebec government at least 30 days prior to the promotion and you’ll need to pay a fee equal to 10% of the prize’s value plus other requirements and/or restrictions. See law…
Mexico: In Mexico, any prize exceeding approximately US$5,000 has to be delivered in the presence of the Mexican authorities. There are six type of sweepstakes recognized by the Mexican government and a permit is required for most of them. More Information…
Brazil: Contests/promotions are prohibited unless permission is obtained from the Ministry of Finance in Brazil and there is not a standard practice for submitting promotions for potential approval at this time.
France: Participants can claim the cost of Internet or postage to enter your promotion and you may be required to compensate them for this cost. Contest rules must be in French.
Sweden: All games of chance (sweepstakes/instant wins) are prohibited, only games of skill (contests) are allowed.
Ireland: All games of chance (sweepstakes/instant wins) requiring purchase are prohibited unless a sponsor is a non-profit charity.
Italy: You are required to have your promotion registered, bonded, and have your rules reviewed by Italian counsel – plus you must involve a public official in winner selection. You must also collect all of your sweepstakes data in Italy.
Netherlands: Winners may not receive more than 2,500 Euros in total prizes and the total amount of prizes for an entire promotion prize pool cannot exceed 100,000 Euros.
Russia: Maintaining publicity rights in perpetuity is not possible in Russia. This means that the rights to use any user generated content (photos, essays, videos, etc.) you collect in conjunction with a promotion will need to be negotiated if you plan on using the content.
Taiwan: In Taiwan, your grand prize can’t be more that 120 times the basic monthly wages set by the Council of Labor Affairs under the Executive Yuan (Cabinet). As of July 1, 2014 this amount is set at NT$19,273 (approximately US$640) per month, so your grand prize cannot exceed NT$2,312,760 (approximately US$76,800).
United Kingdom: US-style “sweepstakes” (a random prize draw promoting a commercial product) are usually labelled as a “prize draw”. A US-style “contest” are usually labelled a “competition” in the UK. In the UK, prize competitions and prize draws are free of statutory control under the Gambling Act 2005 but should follow the CAP Code.