Tuesday, Sep 22, 2020
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KRA to appeal the ruling on taxation of bets

Kenya Revenue Authority (KRA) has announced that it will challenge the judgement of the tax appeals tribunal delivered on November 6 in favour of betting firms.

Through a statement, the taxman said it disagrees with the tax appeals tribunal’s decision asserting that it departed from the decision by Justice Hatari Waweru who found that there was no ambiguity in the interpretation of the term “winnings” as defined by the income tax act.

KRA is also aggrieved by the tribunal’s decision that it had no legal backing in demanding withholding tax from the betting firms and the manner in which it had enforced collection of the tax.

The tribunal ruled in favour of the betting firms and found that the term “winnings” as defined at section 2 of the income tax act does not include stakes placed by a punter and that if the legislation intended for winnings to include stakes-placed, it would have categorically stated so.

In arriving at its decision, the tax appeals tribunal found that justice hatari waweru’s decision was inapplicable hence not binding on it because it did not delve into the definition of the term “winnings”.

Thursday the taxman suffered a blow after a tribunal ruled that a punter’s stake in a bet cannot be charged the 20 percent tax on winnings.

The Tax Appeals Tribunal sitting in Nairobi ruled that the 20 percent tax should be charged on the positive difference between the payout made and stakes placed in a given month.

KRA has been demanding billions of shillings from betting firms based on the gross amount of the payout to the punters, including the staked amount. The tribunal also placed a greater responsibility for payment of the tax on the punters, partially shielding the betting firms from prosecution and aggressive pursuit of the 20 percent withholding tax.

The tribunal’s verdict now looks set to tilt the ongoing tax dispute between KRA and more than 20 betting firm— including SportPesa and Betin Kenya—which have been denied operating licences for the year starting July.

KRA has been demanding Sh61 billion from the betting firms for the period between May 2014 and March 2019.

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