It is barely four months after the coming into force of the 35% tax on gaming revenue and the Treasury is proposing new tax changes in the gambling industry.
This is through the Tax Laws (Amendment) Bill, 2018 that the Treasury has tabled in Parliament for debate and possible approval. The new changes will require gambling companies to withhold tax on winnings paid to punters (players) at the rate of 20%.
Approval of the changes will see a return of a tax that the Government first introduced in 2014 but abandoned in 2016 due to implementation challenges that the industry faced at the time. It remains to be seen whether these challenges will have been resolved ahead of the proposed re-introduction of the tax.
If the tax on winnings is passed, Kenya will be one of the few countries to adopt a hybrid model of taxing the gambling industry. This is because Kenya will be taxing both the gambling companies and the punters at the same time. Internationally, different countries have adopted different models of taxing the gambling industry. Some countries tax gambling companies like any other trading company while others ascribe different taxes depending on the various gambling activities, that is, betting, lottery, casinos and prize competitions. For winnings of the punters, some countries tax them as ordinary income, others attach a final withholding tax on the payments while others do not tax the winnings. In the United States for example, gambling winnings are fully taxable and a winner must disclose the winnings in their tax return. One may deduct gambling losses but only if they are itemized and supported.
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