KRA to challenge Tax Appeals Tribunal on deduction of 20 per cent withholding tax

Times Towers Building, Nairobi, Kenya [Courtesy]

Following a ruling made on Wednesday, November 6 by the Tax Appeals Tribunal (TAT) to suspend the deduction of 20 per cent Withholding Tax from gamblers’ winnings, the Kenya Revenue Authority (KRA) has moved to file a notice of appeal.

In a statement seen in newsrooms on Monday, November 11, KRA has expressed its surprise at the ruling, mainly at the tribunal’s understanding of ‘winnings’ as was amended by the Finance Act 2018.

“KRA disagrees with TAT’s decision for among other reasons, the fact that it departed from the decision by Justice Hatari Waweru’s in a Meru High Court Case in which the Learned Judge had found that there was no ambiguity in the interpretation of the term “winnings” as defined by the Income Tax Act,” read part of KRA’s statement. 

KRA went on to express its distress in the tribunal’s finding, arguing it had no legal support in demanding Withholding Tax from the Betting Firms.

“In arriving at its the decision, the TAT found that Justice Hatari Waweru’s decision was inapplicable hence not binding on it because it had not delved into the definition of the term “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,” the statement said.

Betting firms and government have for a long time been at loggerheads over the taxation of gamers, with the 20 per cent Withholding Tax deductions taking effect following the passing of the Finance Act 2018.

For clarification:

Net winnings – Amount arrived at after subtraction of the initial stake.

Total winnings – Amount arrived at after including both stake and profit.

Some betting firms whose licences are still operational have started implementing the Tax Appeals Tribunal ruling.

Customers attached to these firms have received notifications informing them of the Tribunal’s ruling. .

“Dear Paul, the Tribunal ruled in our TAT Appeal no. 149 of 2019 that winnings refers to payout excluding the amount staked. Going forward, withholding tax is now on this basis i.e. PAYOUT less STAKE. Thank you for standing with us,” read one of the messages from customers seen by GameYetu.