Betting firms have won the case against KRA on how to calculate tax on winnings. Initially, even the principal amount was taxed. The new 20% tax will only affect the winnings minus the stake.
Betting companies led by Sportpesa moved to court for the interpretation of the tax on winnings. Court formed a tribunal to interpret the new tax regime and this is the interpretation.
Assuming the stake is Ksh 1,000, the odds for a game is 1.2, then the total amount to win is Ksh 1,200. Since there is 20% tax on winnings, the only amount to be taxed is Ksh 200.
Here is the summary of the calculation:
Total amount won plus stake=Ksh 1,200
Taxable amount=200(1,200-Ksh 1,000)
Tax charged=Ksh 200
Calculated tax=Ksh 40(Ksh20% of 200)
Total amount to withdraw=1,160(Ksh 1,200-Ksh 40)
From that calculation, you’ll notice that the only amount affected is Ksh 200, the stake is intact.
Before the court made the verdict, the tax on winnings was affecting even the principal amount.