For the longest time, Kenya’s betting industry was loosely regulated and incurred minimal taxes, which drove its exponential growth. This exponential growth in popularity, which led to millions of young Kenyans getting caught in the betting craze, was not well received in government circles.
Starting from 2014, the Kenyan government instituted various tax measures to reign in the industry. Initially, the taxes targeted gaming companies, and culminated in a near industry shutdown in 2019, when majority of the local betting companies either shut down or had their licenses revoked in a major government crackdown. Since then, even more taxes have been introduced, effectively making Kenya’s gambling market one of the heaviest taxed in the world.
If you are betting on a Kenyan site, you not only pay taxes on your winnings, but also on your stakes. This significantly reduces your take-home amount, particularly for single bets. Luckily, there is a way out of it. In this article, we will explore some of the ways you can minimize or completely avoid betting taxes in Kenya.
Overview of Betting Taxes in Kenya
Currently, Kenyan law requires registered gambling companies to withhold 7.5% of bettors’ stakes, and 20% of their winnings as tax. Simply put, you have to pay taxes, whether you win your bets or not. Additionally, gaming companies are taxed at the rate of 15% of their Gross Gaming Revenue (GGR), on top of the standard corporation tax. This complex tax structure makes Kenya one of the few countries in the world that taxes both bettors and gaming companies even before they make any profits.
To put it into more context, if you were to wager Ksh 100 in any licensed Kenyan site, the Kenya Revenue Authority (KRA) will take Ksh 7.5 as soon as you place your bet. Subsequently, your stake amount reduces even before your bet goes through, ending up at Ksh 92.50. Assuming you bet on a game with odds of 1.50 and you end up winning, your payout will be Ksh 138.50 (1.50 x Ksh 92.50), with your total winnings being Ksh 46.25. A 20% cut of your winnings would be Ksh 9.25, which means you will go home with Ksh 122 out of a potential Ksh 150. And that’s before you factor in withdrawal charges.
How to bet without taxes
In November 2022, KRA started integrating their Electronic Tax Invoice Management System (eTIMS) with the payment systems of gaming companies to ensure real-time compliance with tax laws. This means that the government can see every betting transaction made in licensed Kenyan casinos.
With all reputable Kenyan companies being connected to KRA systems, it is difficult to avoid paying betting taxes. Difficult does not mean impossible though, and there are indeed ways you can avoid paying the high Kenyan taxes when betting. Here’s a few of them:
Use foreign betting sites
The surest way to avoid paying Kenyan betting taxes is to use platforms that operate from jurisdictions that have little to no gambling taxes. The United Kingdom, Malta, Ireland, and Australia are examples of such countries. None of these countries have taxes on betting stakes, nor do they charge winnings, which means you get to keep all your winnings.
Notably, we recommend practicing extra caution when betting at foreign betting sites. We typically recommend using sites licensed by credible gambling regulators like the UK Gambling Commission and the Malta Gaming Authority. Ideally, go for reputable sites like Bet365, Betway, and Unibet as they are less likely to scam you.
Bet using crypto
Cryptocurrencies remain in a legal grey area in Kenya, and crypto transactions are not regulated or even taxed in Kenya. This, coupled with the fact that crypto offers a higher level of anonymity than using the Kenyan shilling, makes crypto betting a great option if you wish to avoid tax payments on your stake and winnings.
To use this option, you first need to find a trustworthy crypto betting site, preferably a foreign one. Then, consider using relatively stable crypto coins like Bitcoin, Ethereum, and USDT to protect the value of your money. Again, you have to be extra careful when using crypto sites, as many of them are unregulated and are known to scam players.
Use peer-to-peer betting exchanges
Most Kenyan bettors, especially sports bettors, bet against their bookmakers. In turn, the bookmakers collect the mandated taxes from the bettors on behalf of KRA, and also maintain a “house edge”. Both of these eat into the potential gross profits you can get.
Peer-to-peer betting exchanges, which typically involve players betting directly against other users, are an increasingly viable alternative to traditional betting sites. What’s more, most betting exchanges even let you set your own odds and invite your friends to play. To answer the question that’s probably on your mind, these exchanges make money by charging small commissions (usually 1-3%) on winnings.
Since they do not operate formally under Kenyan law, betting exchanges are not subject to any of the local gambling laws, and players get to keep all their earnings. Some of the most popular international exchange sites include Spreadex, Betfair, Matchbook, and Smarkets.
Are there any alternatives to avoiding betting taxes?
As we have established above, completely avoiding betting taxes is a risky affair that can put you in hot soup if KRA catches up with you. Instead of doing so, you may consider to reduce your tax obligations instead. One way to do this is to go for betting sites that offer free bets and cash bonuses, either for new users, or when you make a deposit. With free bets, you will not be charged the 7.5% excise duty, as your stake is effectively zero. In both cases, however, your winnings will still be taxed. But as you are mostly not using your own money, your gross profit will still be higher.
Can you get into trouble for avoiding betting taxes?
Kenyan tax law does not only require gambling companies to deduct taxes from gamblers, but also requires gamblers to report any earnings they make from gambling in their annual returns. So, yes, you can get into trouble with KRA even if you use crypto to bet, or bet at an offshore betting site. Depending on how much income you earn, the Authority can impose heavy fines on you, freeze your accounts, require you to pay back taxes, or even file criminal charges against you.
The only way to avoid legal problems after evading Kenyan betting taxes is to keep your gambling profits outside the country. Avoid bringing them into Kenya, even in crypto form, as KRA has some robust tools to track cross-border transactions. Unless you are moving some huge amounts or have dual citizenship, going this far is almost never worth it. Instead, we recommend consulting a tax consultant and looking for less risky ways of reducing your tax burden.
