KRA loses Tax battle to Betting Sites

KRA, will not be collecting billions of shillings from betting firms between 2018 and 2019 after a court determined that the tax on winnings did not involve the amount wagered.
The Kenya Revenue Authority had argued it should be allowed to tax both the amount wagered and the amount won.
The High Court judge David Majanja said the government’s argument was ambiguous because the definition of ‘winnings’ was not provided for in law.
The taxman has issued notices to betting firms, including Betin, Betika, and SportPesa, demanding billions in taxes due and freezing their bank accounts.
The KRA also shut trading accounts with Safaricom’s M-Pesa, forcing Betin to cease operations.
The judge concluded that the KRA commissioner could not, during 2018 and 2019, collect withholding tax from betting firms but could only seek payment directly from punters.
The Kenya Revenue Authority (KRA) demanded payment of Sh1.7 billion from Betika Ltd., claiming it was arrears given the newly introduced 20 percent withholding tax on winnings.
The betting firms objected to the demands, saying that the KRA had misinterpreted winnings to include the stake placed by a punter.
Before July 2018, winnings from betting and gaming were not taxable income; The Kenyan Parliament later amended the tax laws. “Winnings” are now defined as the difference between payouts made and stakes placed in each month by each player payable to punters by bookmakers.
Amendments to the income tax law provided that winnings from gambling be considered as income from management or professional fees, royalties, interest, and rent, and imposed a 20 percent tax on winnings.
The judge found that the law did not state or set out what constituted winnings and how to compute the winnings, so he interpreted it in the taxpayer’s favor.
Recently, Safaricom’s Mpesa declared that Kenyans had transacted over 150 billion in the previous year to betting houses. Gambling is rampant among young people despite heavy taxation by the government.

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