Withholding tax on betting winnings in Kenya: the 5% and 20% rules

Two withholding rates now sit in the Income Tax Act for gambling payouts. Money a licensed bookmaker pays to a punter is taxed as "withdrawals" at 5%. The 20% rate is kept for "winnings", which the Act now limits to lottery and prize-competition pay-outs.

That split has applied since 1 July 2026, the date on which most of the Finance Act, 2026 came into operation. The tax is taken when money leaves the bookmaker, so it sits alongside the legal deadlines for paying out a win.

What the Income Tax Act says

Section 2(1) of the Income Tax Act defines "withdrawals" as "any amount of money, cash equivalent, or money's worth paid or disbursed to the account of a player, by a person licensed under the Gambling Control Act". Section 2(d) of the Finance Act, 2026 substituted that definition with effect from 1 July 2026.

The rate sits in Head B of the Third Schedule. Paragraph 5(i) sets the resident rate "in respect of withdrawals made by punters" at five percent, and paragraph 3(i) sets the same 5% for non-residents.

"Winnings" now has a narrow meaning. Section 2(e) of the Finance Act, 2026 inserted a definition of winnings as "a pay-out from a lottery or prize competition" by a licensee under the Gambling Control Act, 2025. Section 21 of the same Act added a rate of twenty per cent for winnings to paragraphs 3 and 5 of Head B.

Who deducts the tax and where does it go?

The payer deducts it. Section 35(3)(h) of the Income Tax Act lists withdrawals among payments to residents from which tax must be deducted, and section 35(1)(i) does the same for payments to non-residents. For a punter, the payer is the licensed operator that releases the money.

Section 35(5) gives the payer five working days after the deduction to remit the tax to the Commissioner. Under section 35(5A), the Commissioner pays the tax deducted from withdrawals into the Sports, Arts and Social Development Fund.

How the deduction shows on a payout

The amount that reaches your M-Pesa or bank account is the withdrawal less 5%. Section 35(5)(b) requires the payer to give the person paid a certificate stating the amount of the payment and the amount of tax deducted.

The Act does not prescribe a format for that record, such as SMS wording or a line on an account statement. If your payout notice shows only the net figure, ask the operator's customer care for the gross amount and the tax withheld.

A payout can also wait on identity checks, because the operator must verify a winner before paying. The documents involved are covered in betting account verification.

Illustrative example: a 5% withdrawal and a 20% lottery prize

Illustrative example. You stake KES 1,000 at decimal odds of 3.00 and the bet wins, so KES 3,000 is credited to your betting account. You then withdraw the full KES 3,000.

The base is the amount paid out, not your profit. The definition of withdrawals has no carve-out for the returned stake, so here the 5% is worked on KES 3,000 rather than on the KES 2,000 gained.

Illustrative example. A licensed lottery pays a prize of KES 10,000. As winnings under the narrowed definition it is taxed at 20%, so KES 2,000 is withheld and KES 8,000 is paid out.

Rate history, step by step

Older wording is still online. The Kenya Revenue Authority's FAQ on betting, gaming and lottery tax says the Tax Laws (Amendment) Act "reintroduced WHT on winnings at the rate of 20%". That page defines winnings broadly across betting, lotteries, gaming and prize competitions, carries no date, and describes the regime before the changes set out above.

The 5% item was already in the Schedule when the Finance Act, 2026 commenced, because section 21 of that Act did not amend item (i) of paragraphs 3 and 5. Kenya Law's consolidated text lists the Finance Act, 2025 (Act No. 9 of 2025) among the Acts that amended Head B. Its earlier consolidations are not displayed as text, so no start date for the 5% item is given here.

The deposit side moved separately. KRA's notice on the Finance Act, 2025 shows betting excise going from 15% of the amount wagered or staked to 5% of the amount deposited into a customer's betting wallet from 1 July 2025. Section 36(b) of the Finance Act, 2026 then reworded the base to the amount "deposited for betting purposes".

Is the 5% a final tax?

The Act does not say. Section 76A bars the Commissioner from assessing income again where it has suffered a withholding tax that is also a final tax. The Head B items for withdrawals and winnings do not carry the words "final tax", unlike some neighbouring items.

KRA's FAQ page does not address the point. If you are unsure how to treat a payout in your return, ask KRA directly before you file.

What this page does not cover

Taxes a bookmaker pays on its own revenue are outside the scope here, and so is excise duty beyond the basics above. The withdrawals rule applies to payments by persons licensed under the Gambling Control Act, so you can check an operator's name against the list of licensed bookmakers. For how licensing, money and complaints fit together, read the guide to how betting site licensing works.