Court Allows KRA to Collect Sh2.7B Withholding Taxes From Sportpesa

The Kenya Revenue Authority (KRA) has received a go ahead to collect more than Kshs 2.7billion worth of monthly taxes on withholding tax on winnings from Sportpesa.

This follows a ruling by Milimani Commercial Courts Chief Magistrate, Peter Gesora, allowing KRA to collect withholding taxes on winnings from betting games on the Sportpesa platform among others, that have been failing to withhold tax on winnings.

The landmark ruling delivered on Thursday, 23rdMay 2019arose from a 2014 suit filed by a Mr. Benson Irungu against Sportpesa Ltd trading as Pevans East Africa. The suit sought to stop Sportpesa from deducting and remitting taxes arising from Mr Irungu’s and any other person’s winnings.

In his ruling last Thursday, Chief Magistrate Gesora while dismissing Mr Irungu’s case noted that the nature of sport betting, winnings are unpredictable and a player cannot be certain of the amount that he will win.

“That being the situation, it is not sound to argue that certain amounts should not be collected by withholding tax agents. Revenue collection is well regulated by statute, and by the fact that Sportpesa is a tax agent is a clear indicator that all those using its platform are obligated to pay tax on their winnings,” Gesora ruled.

The Chief Magistrate added that the KRA Commissioner of Domestic Taxes is mandated to collect taxes from sport betting firms and remit the same to the Sports, Arts and Social Development Fund as set out in section 35 (1) (i) and (3) (h) of the Income Tax Act.

He further advised Mr Irungu to explore provisions for refund if necessary as enshrined in the Tax Procedures Act.

In the rollercoaster suit and prior to the ruling on Thursday last week, Mr Irungu had on 22nd May, 2014, obtained Court Orders restraining Sportpesa from making any withholding tax deductions on any person’s winnings from a bet or game of chance conducted by the firm.

Aggrieved by the order stopping Sportpesa from deducting withholding tax on winnings from betting, KRA which had not been party to the case sought to be enjoined as an interested party while seeking to set aside the earlier orders.

On 29th March, 2019, KRA’s Legal counsel successfully obtained an order from Court setting aside orders obtained by Mr Irungu’s on 22nd May, 2019 and issued by Senior Resident Magistrate D.M. Kivuti sitting at the Milimani Commercial Courts. The orders had temporarily stopped the operations of crucial Income Tax Act sections (Sections 2, 10, 34 and 35) effectively rendering KRA unable to collect taxes amounting to Kshs 2.7Billion per month; earmarked for national development projects.

As per the budget statement read last year by National Treasury Cabinet Secretary, Henry Rotich, taxes drawn from betting activities are earmarked to finance sports, art, cultural developments and the rollout of the Universal Health programmes.