The Malawi Revenue Authority (MRA) has warned betting companies that they risk being charged penalties for failure to deduct 20 percent Withholding Tax on winnings after tax amendments were gazetted.
Taxpayer Services Manager Skazo Mwanda sounded the warning at a meeting with betting companies in Blantyre where MRA was explaining and clarifying the implications of the new tax amendments.
He said Withholding Tax on winnings became effective on 3rd November 2020 when the Taxation (Amendment) Act was gazetted but it was surprising that betting companies were not deducting winnings.
“Winners should start paying their fair share of taxes and you should assist us in deducting Withholding Tax. If you fail to deduct, liability comes to the one who has failed to deduct.
“You should deduct when paying the winners. If its practical to pay the winners, it’s also practical to deduct Withholding Tax. If you don’t deduct Withholding Tax you will be penalised,” Mwanda said.
Betting companies are arguing that it is not practical to deduct Withholding tax on winnings because there are no guidelines on how the tax would be applied.
Premier Bet Malawi Chief Executive Officer Milos Jovanovic said it would be difficult to tax winnings considering that there are thousands of winners on a daily basis.
“We have 1,300 agents and 240 shops across Malawi and it would be difficult to deduct Withholding Tax and give certificates to each and every winner. Just imagine, we had 56, 000 winners on Tuesday alone and it would be difficult to apply the tax on winnings of so many people”, he argued.
On her part, Colony Club Casino Director Loredana Zvic argued that the introduction of Withholding Tax on winnings would drive the betting industry underground and put thousands of jobs at risk.
“The law is wrongly formulated. The law is taxing poor Malawians and we will lose our customers. They will have no motivation for betting or gambling. This risks driving the industry underground and people could lose their jobs,” she argued.
Zvic said the 20 percent threshold of Withholding tax on winnings was too high and there was need to determine the time limit for applying the tax on winnings.
Making a presentation earlier, Domestic Taxes Technical Officer Kondwani Malangwasila said the Fourteenth Schedule to the Taxation Act had been replaced and a 20 percent Withholding Tax on winnings was introduced.
“Winnings means any payment made to any person who wins a bet or a gamble including lottery. The tax on winnings will therefore apply on gross receipts as per the administration of Withholding Tax,” he said.
In his concluding remarks, Taxpayer Education Manager McHizzal Kawanga expressed gratitude to the betting companies for attending the meeting.
“We appreciate the arguments you have put forward. However, we are relying on you to withhold 20 percent when paying the winners. We will come up with guidelines on the application of Withholding tax on winnings and we will engage you individually,” Kawanga said.
Premier Bet, Premier Lotto, World Star Betting, DBR Casino and Colony Club Casino attended the meeting.
Representatives from MRA included Mwanda, Kawanga, Malangwasila, Wadza Otomani, Caroline Chingeni, Napo Simkonda and Faith Ndawala.
