Kenya’s gambling regulator has opposed plans in the Finance Bill 2026 to reintroduce a 20% tax on betting and lottery winnings.
Kenya’s gambling regulator has urged lawmakers to drop a proposal in the Finance Bill 2026 that seeks to reintroduce a 20% withholding tax on winnings from prize competitions and lotteries, warning that the measure would be difficult to enforce.
The Gambling Regulatory Authority (GRA), in submissions to the National Assembly Committee on Finance and National Planning, said the proposal revives a tax regime that the government abandoned just a year ago, creating fresh compliance and operational challenges for betting firms, promotional campaigns, and tax administrators.
At the center of the dispute are amendments in the Finance Bill that would reinstate withholding tax on winnings for both residents and non-residents at a uniform rate of 20%.
The Bill also proposes broadening the definition of deposited amounts to include cash equivalents such as converted chips, tokens, and credits — a move the regulator has separately opposed.
Under the proposed amendments to Section 10 of the Income Tax Act, winnings would be classified as income derived from Kenya. The Bill further inserts winnings into Section 35, which governs withholding tax obligations, while revising the Third Schedule to impose the 20% tax on payouts to both resident and non-resident recipients.
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The proposals would additionally restore a statutory definition of “winnings,” describing them as payouts made by operators licensed under the Gambling Control Act 2025 from lotteries or prize competitions, excluding the original amount wagered or staked.
However, the regulator argued that applying the framework to prize competitions would be problematic because many such promotions involve no wager at all and often reward winners with goods or services instead of cash.
In its submissions, the GRA said taxing items such as household appliances, electronics, shopping vouchers, spa treatments, or vehicle servicing would be practically unworkable. It noted that many promotional competitions function primarily as marketing campaigns rather than gambling activities involving monetary stakes.
The regulator also pointed out that the Finance Act 2025 had already shifted the taxation model by scrapping withholding tax on winnings and replacing it with a 5% withholding tax on withdrawals from betting and gaming wallets. The move redirected taxation away from individual wins and toward cash withdrawals from player accounts.
The Finance Bill 2026 would reverse that approach, bringing back the winnings-based system at a rate four times higher than the current withdrawals levy.
The policy shifts have forced betting operators to repeatedly redesign compliance systems around changing definitions of taxable events. Systems adjusted in 2025 to track withdrawals may now require another overhaul to separate taxable winnings from stakes, bonuses, promotional credits, and non-cash rewards.
According to the regulator, including promotional credits and free bets in the tax framework could trigger valuation disputes because such instruments do not always have a direct cash equivalent. The authority instead proposed limiting the definition strictly to cash deposits made into a punter’s wallet, arguing that this would create a simpler and more predictable tax structure.
The GRA further revealed that tax collections from gambling activities rose by 11% to KSh28.45 billion by April 2026, up from KSh25.24 billion in the previous financial year. The authority attributed the increase to the 2025 tax reforms, which introduced levies on deposits and withdrawals, saying the broader tax base had boosted collections without disrupting growth in the betting industry.