The Kenya Revenue Authority has revived its controversial plan to tax sportsmen on income earned locally and abroad.
In a statement on Tuesday, the taxman insisted that sportspersons, just like other Kenyans, are not exempt from paying taxes and would be required to conform to the tax regime as set out by the constitution.
The move is likely to revive a heated debate that started in 2012 when KRA first mooted the idea sparking huge protests from the sporting community.
“Like other taxpayers, Sportspersons who are residents should pay their taxes in four equal installments, that is, on the 20th of April, June, September and December. Any balance of tax after payment of installment tax should be paid by 30th April of the subsequent year,” KRA said.
“When a prize, reward or fee is paid to a sportsperson who is a resident in Kenya, it is considered to be income accrued in or derived from Kenya and is therefore subject to tax here in Kenya,” read the statement in part.
Hardest hit will be the country’s high-earning athletes who will have to part with millions of their earnings in tax payments.
Sports earners have in the past argued against taxation of money earned in sporting events abroad saying that this amounts to double taxation.
Last year, world 800m record holder David Rudisha said sportsmen get taxed at the point of receipt of the cash rewards.
However, KRA says that it will take into account taxes paid abroad while in computing the levies owed to the Kenyan government.
These taxes paid abroad, the taxman says, should be offset locally in accordance with provisions made in the Income Tax Act.
“The sportsperson should however furnish evidence of the tax paid overseas in order to be allowed to offset it against tax computed locally,” said KRA.
Sportspersons will also be allowed to deduct “expenses incurred in the course of the sportsperson’s performance” from the taxable amount.
Deductible expenses include payment to managers and agents as well as travel and accommodation costs.
SEAL REVENUE LOOPHOLES
In what seems to be a warning to the whole industry, the taxman has also informed the sportspersons to ensure that they deduct withholding tax at the rate of 20 per cent on all payments made to managers and agents.
KRA has been on a drive to review the taxation regime locally and to seal revenue loopholes over the last few years as Kenya’s expenditure continues on an upward trend.
In addition to the sports industry, the taxman has also turned his eye towards landlords and gamblers. In a commitment letter to the International Monetary Fund (IMF) last year, Treasury Cabinet Secretary, Henry Rotich, said that further reforms were expected in the Income Tax Regime to bring capital gains to the fold of taxable earnings.