Today, taxman the Kenya Revenue Authority (KRA) has given the media an update about tax administration in the betting and gaming industry.
The update is key because the space is served by a ton of laws and tax regimes, which, according to the KRA, have been put in place to manage the industry and ensure that the companies offering such services do not overstep their boundaries and that participants, especially the youth, are not addicted to gambling.
According to KRA, as of June 2022, the gross turnover of the Kenyan gambling industry is around KES 50 billion.
Kenya is also one of the leading countries in Sub-Saharan Africa with a growing market share in the betting and gaming industry, alongside South Africa and Nigeria.
The most popular products offered in the Kenyan market are online betting and gaming, but there are also physical betting shops and land-based casinos available.
Currently, more than 170 companies are licensed to operate in Kenya. However, some of them are inactive, yet to launch their services, and are in line waiting for an opportunity that could favour their business.
Under the VAT Act of 2013, betting services are exempt from VAT.
According to the Income Tax Act, betting and gaming companies’ income is subject to corporation tax at 30% for residents and 37.5% for non-residents with Permanent Establishments (PE) in Kenya.
Non-residents who offer online betting platforms for use by Kenyans are subject to Digital Service Tax at 3% (after the digital service tax was raised from 1.5% in mind 2022) of fees paid for the platform’s use.
Winnings are subject to Withholding Income Tax at a rate of 20%.
The Excise Duty Act of 2015 imposes a 7.5% excise duty on the amount wagered or staked for betting and gaming services.
The same rate applies to prize competitions and lotteries (excluding charitable lotteries).
There are more taxes associated with gaming in Kenya as a whole, and this is one of the primary reasons why KRA decided to update the media and the public about the same.
iTax in Gaming
KRA’s iTax system is a web-based, automated system that enables taxpayers to register for different tax obligations, update their PIN registration details, file tax returns, manage tax payments through banks (including for non-residents), apply for payment plans for debts, and request waivers of penalties and interest.
The system also allows taxpayers to make status inquiries with real-time monitoring of their ledger/account income and manage assessments and objections.
In the past five fiscal years, collections from the betting industry have increased steadily, from KES 4 billion in FY 2017/18 to KES 21 billion in FY 2021/22.
The current fiscal year’s target is KES 24 billion, and collections so far have exceeded KES 15.8 billion.
Kenyan betting and gaming companies must now pay Excise Tax (7.5% on stakes) and Withholding Tax (20% on winnings) in real-time or near real-time.
The rollout began in October 2022 with a phased approach, starting with top companies based on total betting taxes revenues in FY 2021/2022.
The first phase involved daily tax remittances for 16 companies, and the second phase began in January 2023, involving data verification and compliance checks.
KRA has collected KES 5.8B from the two tax heads Excise tax and WH on winnings from 16 on-boarded companies.
The next step is to onboard 20 identified companies.
Finally, KRA has revealed that to improve monitoring, the regulator and other agencies will share data.
Taxpayers will be educated on new tax laws through engagement.