KRA challenges Tax Appeals Tribunal ruling on withholding tax

Written By: Regina Manyara
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The deduction of 20 per cent withholding tax from gamers winnings remains suspended following a ruling by Tax Appeals Tribunal (TAT) delivered last week in favour of seven betting firms.

Consequently, The Kenya Revenue Authority (KRA) has filed a notice of appeal.

Betting Firms had filed an appeal before the tribunal challenging KRA’s interpretation of the term “winnings” as was amended by the Finance Act 2018 as well as KRA’s enforcement mechanism of placing agency notices on the Betting firms’ accounts.

The Government and the betting and gaming industry have been at opposing sides on taxing gamers that win prize money for placing bets; with government striking the first blow with the passing of the Finance Act 2018, which slapped winners with a 20 per cent withholding tax.

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This meant that if you placed a bet and won Ksh 50 000 you would take home Ksh 40 000 whereas the balance of Ksh 10 000 was withheld by the betting company and remitted to KRA.

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Some of the sector players, were in disagreement arguing the move would see customers incur a higher tax burden that would wipe out their winnings as well as eat into the amount they had put in the bet.

Last week, a Judgment of the Tax Appeals Tribunal delivered on 6th November 2019 in favour of the Betting firms and suspended the enforcement of the deductions, a decision KRA is challenging.

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“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. 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”, said KRA in a statement.

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Betting firms had begun deducting 20 per cent withholding tax from their customers’ winnings in compliance with directives from the Betting Licensing and Control Board and the Kenya Revenue Authority- despite an April 2019 court order that barred the betting firms from deducting and remitting the money to KRA, until this particular case was heard and determined.

“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.”

Consequently, KRA has commenced the appeal process by filing a notice of appeal, even as the enforcement remains suspended.

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