This archive report was first published on 11 November 2019.
On November 7, 2019, the Tax Appeals Tribunal delivered a ruling that significantly impacted the betting industry in Kenya. The tribunal ruled in favor of SportPesa and Betin, two prominent betting firms, in a case challenging the 20% withholding tax imposed by the Kenya Revenue Authority (KRA).
The ruling stated that the 20% withholding tax should be applied to net winnings, not total winnings. Net winnings are the amount remaining after deducting the initial stake from the total payout. This means that the tax will now be calculated on the amount won, rather than the total amount received.
For example, if a bettor places a stake of Sh100 on a bet with an odd of 15.5 and wins Sh1550, the net winnings would be Sh1450 (Sh1550 - Sh100). The 20% withholding tax would then be applied to this amount, resulting in a tax of Sh290. The bettor would be left with Sh1160 as profit.
Following the ruling, some betting firms have started implementing the change, with customers receiving text messages informing them of the new tax basis. The move comes after licensed betting firms began deducting 20% withholding tax from their customers' winnings in September 2019, in compliance with directives from the Government.
The introduction of the 20% withholding tax was part of the Finance Act 2018, but it has faced litigation from the betting industry. SportPesa, one of the affected firms, halted operations in Kenya and expressed disappointment with the 20% excise tax on all betting stakes.
