How is Betting Taxed in Kenya?
The rise of the betting industry in Kenya is there for all to see. With the use of the ubiquitous smartphone, one can engage in all forms of gaming from the most popular football betting to poker, casino and even dog racing. In this post we will explain how the taxes affect you the player as well as the betting sites.
How Betting Taxes Affect Bettors
In June, 2018 the government of Kenya introduced a 20% withholding tax on all wins from betting. This means that any amount won through betting will attract a 20% deduction that goes to the government. For example if you place a bet with total odds of 9.0 along with a stake of sh.100 you will only receive sh.720 as winnings, and not sh.900 as you would earlier. The betting site withhold sh.180 which will be remitted to the government.
How Betting Taxes affect Bookies
The growth of this lucrative industry estimated at Sh200 billion annually has dominated talk on the floor of Parliament on numerous occasions. Similarly keeping a hawk’s eye on the billions is the ever watching government through the Kenya Revenue Authority (KRA) aiming to squeeze a shilling of revenue from every inch of the economy.
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With the passing of the Finance Bill 2018, KRA collects 15 per cent betting tax levied on betting firms’ Gross Gaming Revenues. The rate was initially pegged at 35 per cent but was reduced after outcry from stakeholders in the industry.
As with every other commercial large company, a further 30 per cent is levied on profits made by the betting companies otherwise known as corporate tax.
However despite the taxes gotten from the revenues and profits of the betting firms, the government was not satisfied. In a bid to curtail the rise of betting described as a sin industry, the state went after winnings won by punters.
A report by the Betting Control and Licencing Board revealed that betting companies paid a drop in the ocean amount of Sh4 billion in taxes despite generating Sh204 billion in revenue.
There has been a lack of consensus on the interpretation of winnings leading to strained relations between the industry and the taxman
At the core of the issue is the interpretation of betting in Kenya. KRA views the practice of placing bets as a form of entertainment as it does not lead to income generation because it is a consumption. Thus it in practice taxes the winning of punters when they wage successful bets.
The 2018 Finance Bill heralded the withholding tax imposed on all gross winnings payable by all sectors governed by the Betting, Lotteries and Gaming Act i.e. gaming and prize competitions. Thus winning clients will only be liable for 80 per cent of their winnings.
The tax required by the government will be deducted by the betting firm immediately a winning bet is complete.
Betting firms have termed the withholding tax as extortionist since it taxes consumption before the consumption actually happens.
Also hanging over gamblers’ heads like the sword of Damocles is the possibility of the introduction of excise duty on betting activities at the rate of 10 per cent of the wager placed. Proposed by then Treasury CS Henry Rotich in the 2019/2020 budget, it could soon be law should Parliament accept the new tax proposal aimed at sieving out the sin exercise.
Finally, the Gaming Bill 2019 passed by Parliament earlier this year provides a steep barrier of entry for betting firms in Kenya with hefty licencing fees to set up base in the country. New entrants will be required to part with Sh100 million to the government for gaming securities to serve as a cushion to gamblers should the companies refuse to pay a windfall arising from many gamblers winning from their wagers.
In addition the Bill raised the minimum amount of a bet.