Taxation of Gross Gaming Revenue and Winnings

Following the passage of the Income Tax Act, 2023 (Act 1094) and its associated implementation challenges with regard to the interpretation of “end of game” as used in the Act and the treatment of “deductible stake”, it has become necessary to amend the Practice Note issued on 5th June 2023 with Serial Number “DT/Lottery/01/2023” to clarify the identified interpretational issues including time for the withholding of the taxes from winnings and other related matters.

The Commissioner-General of the Ghana Revenue Authority is empowered under section 100 of the Revenue Administration Act, 2016 (Act 915) to issue Practice Notes setting out the interpretations placed on provisions of the Act.

Accordingly, this Practice Note is issued in respect of taxation of Gross Gaming Revenue (GGR) and Gross Winnings as provided for under Sections 6, 100(A) 115, 117, 119, and Paragraphs 7(A) and 8(1)(b)(x) of the First Schedule to the Income Tax Act, 2015 (Act 896) as amended.

This Practice Note is issued to provide direction and guidance to officers of the Ghana Revenue Authority, Tax Practitioners, Consultants, Taxpayers and the General Public on the acceptable tax treatment of GGR and Gross Winnings from Lottery in order to achieve consistency in the administration of the Act.

In this Practice Note, the word “Act” means the Income Tax Act, 2015 (Act 896) as amended. Unless the context otherwise requires, definitions and expressions used in this Practice Note, have the same meaning as they have in the Act and Revenue Administration Act, 2016 (Act 915).

For the purpose of this practice note “Lottery Operations” include:

1. ▪ Sports Betting
2. ▪ Casinos
3. ▪ Route Operations
4. ▪ Remote Interactive Games
5. ▪ Marketing Promotions
6. ▪ National Lotto Betting
7. ▪ Private Lotto Betting
8. ▪ Other games of chance

player/punter at the end of each game. This includes the value of stake/bet/wager/bonus/free bets. The total amount or the value of prize paid includes: a. payment to punters/players before the game ends prematurely (cash-out during the game). b. Payment/prizes to participant of marketing promotion

total payout at the end of the reporting period.

tax” is the payout at the end of the game less the amount of the deductible stake, if any. The tax shall not be imposed on withdrawal of deposits.

of a player which is directly attributable to the win. This does not include deposits, transaction fees and other cost or expense incurred by the player/punter during the game.

payment methods, that are added to his balance held in a wallet or ledger with the operator.

monitory prize) from a wallet, a bank account or ledger held with the operator or a financial institution as a result of a withdrawal request made by a player/punter.

earlier withdrawal due to system challenges.

Type of Lottery Operation Gross Winnings

Sports betting/ Remote interactive Payout at the end of the game/draw or games and other games of chance cash-out during the game less the value of the deductible stake. Lotto operations by Private Lotto Operators/ National Lottery Authority Casino/Route operations Payout less total value of chips/credits purchased (buy-in) at the end of the game.

Marketing promotions Total amount/prizes given out or paid after a draw

This Practice Note covers: Obligations of lottery operators with respect to tax treatment of:

1. • Gross Gaming Revenue (GGR)
2. • Withholding tax on Gross Winnings from lottery

GGR for the respective lottery operation shall be determined as follows:

i. Sports Betting/ Remote Interactive Games/Lotto and any other games of chance: GGR shall be the total amount staked/bet/wagered less the total payout at the end of the period.

ii. Banking Table Games/Route Operations: GGR for banking table games, route operations and remote interactive games is the closing float (which includes closing cash + closing chip + closing plaques + credits) less (opening float + total fills).

iii. Poker and Other Non-Banking Table Games: GGR for each table game in which the casino operator is not a party to a wager/stake/bet

is all money received by the casino operator as compensation for conducting the game including the total value of rake charged (i.e., cost of facilitating the game) to patrons at a poker table.

Note: In compliance with the above methods for determining GGR the

operators are required to maintain records and follow procedures that are verifiable in accordance with international standards.

Operators required to pay tax on GGR include:

1. ▪ Private lotto operators
2. ▪ National Lottery Authority (NLA) collaborators
3. ▪ Sports betting operators
4. ▪ Casino operators
5. ▪ Route operators
6. ▪ Remote interactive games operators
7. ▪ Other games of chance operators

Where a negative GGR is recorded in a particular month, the operator is allowed to carry forward the negative GGR in the subsequent month(s) by deducting it from a positive GGR recorded. In effect, the operator may not be liable to tax on GGR for the month in which the negative GGR was recorded.

The GGR from Lottery Operation is subject to tax at the rate of twenty percent (20%) as provided for under the Act.

▪ For purposes of Section 2 of the Act, the chargeable income of a person from lottery operations is the GGR.

▪ For purposes of Section 2(1) of the Act, GGR is the total amount staked or wagered less prizes or Gross Winnings paid.

▪ Where a person has chargeable income other than income from lottery operations, the person shall be charged separately in accordance with the Act.

i. The Act requires that, a resident person who pays an amount as winnings to a punter/player/wager (resident or non-resident person) through lottery operations, with a source in Ghana, shall withhold tax from the Gross Winnings paid at the rate specified under paragraph 8(1)(b)(x) of the First Schedule to the Act and pay same to the Commissioner-General.

ii. In the case of casino and route operations the withholding tax is on the payout to the player/punter less value of chips/credit purchased (buy-in).

iii. Where a resident person pays Gross Winnings to a punter/player/wager through lottery operations, in the form of a prize other than money, the person is required to withhold tax at the market value of the prize and pay same to the Commissioner-General.

Note

▪ Where payment of Gross Winnings to punter/player/wager through lottery operations is partly money and partly non-monetary, the person is expected to follow the treatments in paragraphs 5.2(i)&(iii) above.

▪ Where a game is annulled or cancelled and player’s stake is returned or where the value of the payout is less or equal to the value of the stake, withholding tax may not apply.

▪ In the event that a punter initiates a request to withdraw an amount inclusive of a deposit, there will be no tax imposed on the deposit.

▪ Where a punter/player does not redeem a win or remains inactive (i.e.no stakes or withdrawal) after 15 days of the win, the amount won or any outstanding balance from the win will be deemed as redemption and hence the tax becomes payable.

Sources of Gross Winnings include:

1. ▪ Lotto from NLA
2. ▪ Lotto from NLA Collaborators
3. ▪ Lotto from Private Lotto Operations
4. ▪ Sports Betting
5. ▪ Casino Games
6. ▪ Route Operations

1. ▪ Marketing promotions
2. ▪ Remote interactive games
3. ▪ Other games of chance

For the treatment of withholding taxes other than winnings from lottery, refer to the

DT/2016/001.

When it comes to the actual calculation of the withholding tax, the process remains simple and straightforward: i. A player opts to withdraw a specific sum from their gaming wallet/account, known as the payout. ii. The deductible stake is subtracted from the payout to derive the gross winnings - the amount on which withholding tax is calculated. iii. WHT is calculated as 10% of the gross winnings. This tax amount is withheld from the payout. iv. The remaining payout, after the withholding tax deduction, is then transferred to the player's external wallet or account held with a financial institution. v. Where a punter plays a game involving winnings and losses, if he/she makes a withdrawal, the deductible stake shall NOT include the stakes that resulted in the losses but only the attributable stakes.

Example 1

One-off Withdrawal from Gross Winnings Abeku deposits GH¢100.00 into his gaming wallets or accounts. After engaging in a series of bets and playing of virtual games with the GH¢100.00 all of which resulted in wins that increased his wallet/account balance to GH¢300.00. He decides to withdraw the entire balance of GH¢300.00 to his mobile money wallet/account. What is the deductible stake, the withholding tax on gross winnings and the amount payable to Abeku?

Solution

Explanation

The payout of GH¢300.00 will be matched against his deductible stake of GH¢ 100, (i.e., the amount of stake attributable to the win). The deductible stake is then subtracted from the payout, resulting in gross winnings of GH¢200.00. A 10% withholding tax is applied to the gross winnings, which equates to GH¢20.00. The operator is expected to transfer GH¢280.00 (i.e., GH¢300.00 - GH¢20.00) to the player's mobile money wallet/account and remit the withholding tax of GH¢20.00 to GRA.

Example 2

One-off Withdrawal from Gross Winnings where there are Mixed outcomes

Julie deposits GH¢100.00 into her gaming wallets or accounts. After engaging in a series of bets and playing of virtual games with the GH¢100.00, GH¢60.00 from the stakes resulted in wins while the remaining GH¢40.00 resulted in losses. The win increased her wallet/account balance to GH¢300.00. She decides to withdraw the entire balance of GH¢300.00 to her mobile money wallet/account. What is the deductible stake, the withholding tax on gross winnings and the amount payable to Julie?

Solution

Explanation

The payout of GH¢300.00 will be matched against her deductible stake of GH¢ 60. The deductible stake is then subtracted from the payout, resulting in gross winnings of GH¢240.00. A 10% withholding tax is applied to the gross winnings, which equates to GH¢24.00. The operator is expected to transfer GH¢276.00 (i.e., GH¢300.00 - GH¢24.00) to Julie’s mobile money wallet/account and remit the withholding tax of GH¢24.00 to GRA.

Where there are Multiple Successive Withdrawals In instances where a player makes one or more additional withdrawal requests following a withdrawal that concluded a game, without initiating a new game (i.e., not placing any further bets between these withdrawals), special consideration is applied to the calculation of withholding tax. In this scenario, such subsequent payouts shall be treated as part of the same game. This means any remaining deductible stake (including the tax component of the withdrawal rollback) from that game session will still be applicable.

Example 3

Kwame Bash makes an initial stake of GH¢100.00 but unfortunately loses it all. He stakes an additional GH¢100.00 and wins, increasing the wallet balance to GH¢600.00. He then stakes GH¢100.00 from his wallet and again wins, increasing his wallet balance to GH¢700.00. Finally, he makes a 4th stake of GH¢100.00, but unfortunately loses it. In this case his gross winning will be GH¢ 500.00 (i.e. GH¢700 - GH¢ 200.00). Explanation: Kwame’s 1st and 4th stakes (i.e., GH¢100.00 + GH¢100.00) did not result in a win and hence cannot be treated as deductible stakes. However, it is his 2nd and 3rd stake (GH¢100.00 + GH¢100.00) which resulted in the win that qualifies as a deductible stake.

Assuming Kwame makes a first withdrawal of GH¢50.00 from the win, there will be no withholding tax from the withdrawal because the deductible stake is less than the amount withdrawn. There will be no tax when he makes a second withdrawal of GH¢150.00 because of the outstanding deductible stake of GH¢150.00. However, any subsequent withdrawal from the win will be subjected to the tax at 10% because

he would have exhausted all the deductible stake. The table below summarises the above scenario:

NOTE

1. Assuming Kwame fails to withdraw the remaining balance of GH¢150.00 in Column D within 15 days, the operator is bound to withhold 10% from the remaining amount (GH¢ 150.00) and remit to GRA.

3. It is crucial to note that Kwame’s stake of GH¢150 started a new game session which effectively converted the amount into a deductible stake.

Example 4

Stake/Wagers for on-going or Future Events Consider a scenario involving a player/punter who wagers for ongoing event and future events Day 1: Deposits GH¢10.00 and places a bet (bet-Z) of GH¢10.00 occurring in two days’ time. Day 2: Deposits GH¢10.00 and places a few bet of GH¢10.00 in the casino, resulting in a balance of GH¢50.00 that he decides to withdraw. Day 3: Wins (Bet Z) that pays GH¢20.00 which he decides to withdraw.

Note

▪ For day 2, the player would have a deductible stake of GH¢10.00 for his withdrawal resulting in a withholding tax being charged on the GH¢40.00 (i.e. GH¢50.00 - GH¢10.00).

▪ For day 3, the player will be granted deductible stake of GH¢10.00 on Day 1 resulting in the WHT being charged on GH¢10.00 (i.e., GH¢20.00 - GH¢10.00).

Nanthom purchased a total credit of GH¢2,000 to play a game at AD Casino Ltd. He won GH¢10,000 at a slot machine. How much is AD Casino expected to withhold from Nanthom’s winnings?

Suggested Solution: ▪ The casino would first need to calculate the Gross Winnings by subtracting the value of credit purchased from the total payout amount. i. e

A punter arrives at the casino and goes to the cashier to buy some chips. He exchanges GH¢10,000.00 in cash for 20 chips of GH¢500.00 each. He also buys one plaque of GH¢10,000.00 which is a large, rectangular chip that is used for high- stakes games. The game begins and the punter plays a few hands. He wins some and loses some, but overall, he is doing well. He wins the pot and collects all the chips in the middle of the table. He now has 80 chips worth GH¢40,000.00 on the table and one plaque of GH¢10,000.00. He decides to cash out and leave the game by gathering his chips and walks back to the cashier to exchange for money. He receives GH¢10,000.00 for a plaque and GH¢40,000.00 for the 80 chips from the cashier.

Compute the Withholding tax on the punter's payout.

Solution.

Sugar Ray staked 3 “permed” numbers totaling GH¢1,700.00 with a lotto operator. The 1st “permed” stake was GH¢200, the 2nd was GH¢500.00 and the 3rd was GH¢1,000.00. At the end of the draw, it was the 2 nd “permed” number of GH¢500 that won GH¢20,000 as the payout. How much is the operator expected to withhold from Sugar Ray’s gross winnings paid?

Suggested Solution: ▪ The Lotto operator would first need to calculate the Gross Winnings by subtracting the deductible stake from the total payout amount. i. e

Gross Winnings = Payout - Deductible stake

Alex Sunu 2020 Ltd operates sports betting. The company recorded total stakes of GH¢ 500,000 for the period 1st June to 30th June, 2023 involving 200 punters/players. The total Gross Winnings paid to players was GH¢200,000 as indicated in the table below:

During the period, the company incurred the following business expenses as incidental to the lottery;

1. • Bonus Cost (free bets)- GH¢10,000.00
2. • Electricity-GH¢1,000.00
3. • Business Promotion -GH¢1,000.00
4. • Subscription - GH¢500.00
5. • Registration & Permit - GH¢1,000.00
6. • Gaming Licence - GH¢10,000.00
7. • Salaries & Allowance - GH¢ 350,000.00 The company also made sales of GH¢500,000.00 from the hotel business and investment income of GH¢50,000.00

Required

1. (a) Determine the gross gaming revenue
2. (b) Compute the gross gaming tax payable for the period

Solution

Note

All other expenses/income listed above other than stakes and payouts are excluded in the determination of GGR. Hence, where a person has a chargeable income other than income from lottery operations, the person shall be charged separately in accordance with the Act.

Ranspio Casino in the month of June had an opening float of GH¢100,000.00 for its table games. In the course of the game total fills of GH¢150,000.00 was added to the float. The company had the following balances at the end of the month: Cash – GH¢ 150,000.00 Plaque - GH¢ 80,000.00 Chips - GH¢ 120,000.00

Required

1. (a) Determine the GGR for the month; i. table games ii. slot machine iii. total GGR
2. (b) Compute the total GGR tax payable for the period

Solution

Ranspio Casino in the month of July had an opening float of GH¢200,000.00 for its table games. In the course of the game total fills of GH¢300,000.00 was added to the float. The company had the following balances at the end of the month: Cash – GH¢150,000.00 Plaque - GH¢100,000.00 Chips - GH¢120,000.00

The Company also operate a slot machine showing the following records at the end of the month;

Required

a. Determine the GGR for; i. table games ii. slot machine iii. total GGR b. Compute the total GGR tax payable for the period:

Solution

Note: because the company recorded negative GGR, there would be no tax

payable. The company is allowed to carry forward the negative GGR to the month of August, 2023.

The tax on GGR is due for payment at the same time as the due date for filing the GGR tax return. The return is due by 15th day of the month following the month in which the GGR transaction return relates.

At the end of each year, all persons engaged in lottery operation are required to file annual GGR tax returns and pay any tax outstanding. The annual return and any tax payable are due not later than four months after the end of the basis period in accordance with section 124 of the Act.

In the event where GRA ascertain that the total amount of GGR tax payment made for the year is less than the total monthly GGR tax liability for that year, GRA will issue an assessment notice (including interest and penalties as applicable) on the difference to the lottery operator for payment. On the other hand, where the total amount of payment made by the lottery operator for the year exceeds the GGR tax liability due, the operator will be allowed to take credit on the excess payment in the month(s) following an audit.

A withholding tax on Gross Winnings is due for payment at the same time as the due date for filing the WHT on Gross Winnings tax return. The return is due by the 15th day of the month after the end of the calendar month in which the tax was withheld as provided for under section 117 of the Act.

A lottery operator who is not liable to pay withholding tax on winnings for a particular month shall file a “Nil” return with the Commissioner-General within fifteen (15) days after the end of the month in which the tax relates. For example, a return on withholding tax on winnings deducted in the month of July, 2023 shall be filed and paid on or before the 15th day of August, 2023. Note: For persons whose primary business is not lottery but run marketing promotions, they are required to file ‘withholding tax returns on winnings’ within 15 days after the end of the month in which the tax relates as and when prizes are paid.

In accordance with section 33A of the Revenue Administration Act, 2016 (Act 915) as amended, the Commissioner-General may for the purpose of assessing the correct taxes from Lottery Operation;

i. establish a Revenue Monitoring System to verify the actual revenue that accrues to lottery operators for the purpose of computing taxes due the Government under the Act.

ii. be given physical access to the physical infrastructure or system of a lottery operator at an equivalent point in the infrastructure or system where the operator’s system is connected.

For effective implementation and administration of the Act, all lottery operators are required to make changes to their software (where applicable) to provide essential information in the withdrawal sections. Not only must this information be clearly displayed, but the appropriate tax must also be withheld at the point of withdrawal as a separate transaction. Key details to show to players before they request a withdrawal include:

▪ Deductible Stake: Players must be provided with this amount along with how it was computed.