Lottery winners to surrender 20pc of earnings to taxman

 

Robert Ngeru (left), the chief operating officer Samsung Electronics East Africa, hands over the keys to a pickup won by James Saruni in ‘Samsung Jaza Keja’ promotion last year. FILE 

By Herbling David, hdavid@ke.nationmedia.com

In Summary

• Gamblers must now part with 20 per cent of proceeds as KRA backdates law to January 1.
• The Finance Act 2013 imposes a 20 per cent withholding tax on all winnings from gaming and betting activities.

• Lottery winners hit as windfall tax comes into force

Winners of lotteries must now part with a fifth of their prize money following the coming into force of a new law that introduces a tax charge on such earnings.

The Finance Act 2013 imposes a 20 per cent withholding tax on all winnings from gaming and betting activities, giving the government a piece of the gambling pie.

The Kenya Revenue Authority (KRA) has backdated the new law to January 1, 2014, creating a logistical nightmare for gaming promoters who must now trace those who have won in the past 13 days and remit the taxes.

“Such winnings, whether payable in cash or kind, shall be subject to withholding tax at the rate of 20 per cent of the gross proceeds if paid in cash or 20 per cent of the fair market value of the winnings if paid in kind,” KRA said in a notice published on Monday.

“Payers of the winnings will be required to deduct the withholding tax with effect from January 1, 2014 and remit the same to the commissioner by the 20th of the subsequent month.”

This means the winner of a Sh1 million jackpot will take home Sh800,000 after surrendering Sh200,000 to the taxman. If the prize won is an


Isuzu pickup truck worth Sh2.5 million, the winner will have to part with Sh500,000 — equivalent to 20 per cent of the car’s value — before driving off with the award.

The Treasury has gone after gamblers’ prize monies in a bid to plug the funding gap in Kenya’s ambitious Sh1.6 trillion Budget, which is under pressure from a rising public wage bill and increased demand for funding from the 47 devolved units.

READ: Taxman catches up with gamblers

The government appears to have placed high bets on sin taxes – introducing tax on lottery winnings, raising excise duty on keg beer and increasing taxes on tobacco.

Other tax measures introduced by President Uhuru Kenyatta’s Jubilee government include 16 per cent VAT charged on previously zero-rated goods, nine per cent fringe benefits tax and raising royalties on minerals, including Sh140 per tonne of cement.

The gambling business is regulated by the Betting Control and Licensing Board (BCLB), which issues firms with permits to run public lotteries and validates selection of winners in gaming competitions.

BLCB acting director Charles Wambia said his agency was discussing with KRA how to roll out withholding tax on winnings.

“We are talking to KRA about how it will be implemented,” said Mr Wambia without providing any further details.

BCLB allows all forms of gambling including online betting whose growth is linked to the fact that seven out of every 10 Kenyans have access to an Internet-enabled mobile phone that offers them easy access online.

Kenya’s gambling industry is dominated by casinos, SMS lotteries run by mobile service providers, sports betting, and lotto firm Kenya Charity Sweepstake.