The Kenya Revenue Authority (KRA) Monday said it has lodged an appeal against a ruling by the Tax Appeals Tribunal that a punter’s betting stake cannot be charged 20 percent tax on winnings.
The taxman is also challenging another ruling that the responsibility for payment of the tax should be on the punters and not the betting firms, shielding the latter from prosecution and aggressive pursuit of the 20 percent withholding tax.
The tribunal sitting in Nairobi had on Wednesday ruled that the 20 percent tax should be charged on the positive difference between the payout made and stakes placed in a given month.
The case looks set to influence an ongoing tax dispute between KRA and more than 20 betting firms— including SportPesa and Betin Kenya—which have been denied operating licences for the year starting July.
“Kenya Revenue Authority (KRA) will challenge the judgment of the Tax Appeals Tribunal (TAT) delivered on 6th November 2019 in favour of the betting firms,” the taxman said in a statement.
“KRA has commenced the appeal process by filing a notice of appeal, which it did on 8th November, 2019.”
KRA has been demanding billions of shillings from betting firms based on the gross amount paid to the punters, including the staked amount.
SportPesa on September 27 announced it was halting operations due to a drastic hike in taxes on betting stakes and the unresolved disputes with KRA. Betin Kenya also ceased its operations, citing the heavy taxation as the main reason.
The Treasury last year reintroduced the 20 percent tax on winnings, and amended the definition of winnings to include the stakes, sparking the dispute with the betting firms.
The earlier law provided for the 20 percent tax to be charged on net winnings, which is arrived at by deducting the amount staked by the punter. But this was revised to include gross winnings.
“KRA is aggrieved by the tribunal’s finding 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,” said the taxman. The High Court had referred the dispute over tax on winnings to the tribunal after SportPesa, represented by Iseme, Kamau and Maema Advocates, sued KRA in a suit that saw other betting firms including Betin get enjoined.
KRA has been demanding Sh8.59 billion from Safaricom #ticker:SCOM as withholding tax arrears due from the two major betting firms -- SportPesa and Betin Kenya.
The taxman demanded that Safaricom pays Sh5.29 billion withholding tax arrears due from Gamcode Limited, trading as Betin, and a further Sh3.29 billion due from Pevans East Africa, which trades as SportPesa.
The gaming companies largely relied on Safaricom’s network to take bets, communicate with users and process payments through paybill numbers.
The government in July ordered Safaricom to stop processing payments for sports betting companies, effectively grounding their operations.