KRA Wins Ksh1.6 billion In SportPesa Tax Row

Kenya Revenue Authority (KRA) has been given the go ahead to enforce the collection of winnings or betting tax using agency notices, as they are income and subject to taxation.

High Court judge Alfred Mabeya said winnings or betting tax is an income and is subject to taxation and the tax rates prescribed in the Income Tax Act.

The judge made the decision in a matter filed by Pevans East Africa, the previous owners of betting firm SportPesa.

KRA was demanding Ksh1.6 billion from the betting firm however SportPesa argued that the taxman had no powers to use agency notices to collect winnings, an argument that was upheld by the Tax Appeals Tribunal.

The court heard that the betting firm made a voluntary self-disclosure of betting tax for 2018 of Ksh1.2 billion and made a settlement proposal. The Finance Act of 2018 required taxpayers to withhold 20 percent on gross winnings paid by punters and remit it to KRA.

KRA said it later assessed withholding tax on winnings for October 2018 to February 2019 and demanded Ksh21.2 billion inclusive of penalties and interest.

When the firm refused to pay, KRA wrote to Betting Control of Licensing Board (BCLB) saying the betting firm was not tax compliant. The firm paid Ksh1.9 billion pending the determination of the case.

In the appeal, KRA said the betting firm had conceded to unpaid tax but failed to settle the amount and the tribunal erred in holding that KRA lacked the powers to enforce the collection of taxes under Betting Act.

The betting firm also said KRA should offset the amount demanded from the Ksh1.9 billion it had paid earlier.

Justice Mabeya said KRA is empowered to administer and enforce provisions of laws including betting Act, even though the Betting Act does not provide for an enforcement mechanism.

The judge said betting tax qualifies as a withholding tax and the issuance of agency notices to force collection of betting tax withholding tax is well within the powers of KRA. He said it was clear that the Ksh1.9 billion paid in 2019 was not withholding tax but to avoid non-renewal of its license.

“The court finds that the sum of Kshs1.9 billion was not paid as withholding tax but as security for any taxes that would have been found to be due,” the judge said. He, however, directed that the amount to be deducted from the amount deposited to KRA and the balance be subjected to refund as provided by tax laws.