Taxes and the Professional Sportsperson

Taxes! Oh boy! Is it that time of the year? No, not yet! But why not get ready and know what the tax man expects from you the professional sportsperson. By a professional sportsperson, I mean a person who makes a living by playing a professional sport. For example, an athlete, footballer, basketballer or cricketer.

As a Kenyan sportsperson, the taxman will specifically be interested in you if you are a Kenyan resident. And what is the difference citizenship and residence? Well, for purposes of tax a Kenyan resident can be an individual or a corporate. In this case we shall focus on the individual.

For you to be a Kenyan individual resident, you must have a permanent home in Kenya and also you must have been present in Kenya for any period on a particular year of income. In most cases, most athletes would qualify as residents since they have permanent homes in Kenya and they train in Kenya. Of course they have the option of retaining their citizenship but relocating to other countries as residents, though that would mean they lose the right to train in Kenya which would be unfortunate.

You could also be considered resident if you were present in Kenya for a period or periods totalling to 183 days or more in that year of income; or you were present in Kenya in that year of income and in each of the two preceding years of income for periods averaging more than 122 days in each year of income;

Citizenship on the otherhand is about your state of membership and belonging to a state. Unlike residents, citizens get all of the rights, privileges, and responsibilities defined by a country’s laws. These include the rights to vote, participate in politics and receive education, as well as request for legal assistance and protection. Citizenship allows you the right to receive a passport from your country and pass this right to citizenship onto your children. Citizenship is generally for a lifetime and individuals do not have to fulfil any requirements to retain it, such as living or working in the country in question. Many nations also allow their citizens a second nationality too — i.e. dual nationality.

For sometime now, KRA has been tasked with tightening their belts on revenue collection and were given targets. Guess who was among the casualties? Sports people of course! What was being targeted? Winnings and takings from sports people earned from across the globe. The reaction? Absolute anger and resentment to the tax man.

Some sportspersons put the case of double taxation on the table to justify their anger. Totally understandable of course. Remember as a sportsperson you pay taxes on your winnings in the host country at a rate anywhere between 12% and 30%. Next you have to pay your agent and manager, approximately 10% to 15%. And now KRA needs 30% also? Oh boy!

But here comes the saving grace – double taxation treaties. At the moment, Kenya has double taxation treaties with several countries (see link), which protects residents earning income from these countries from double taxation. The list includes the UK, which was cited by the athletes as one of the countries that had punitive taxes.

On countries which we don’t have double taxation treaties with, the Income Tax Act allows for the deduction of income tax or tax of a similar nature paid on income which is charged to tax in a country outside Kenya. You need only engage the services of a tax consultant or accountant to advice you on how to navigate the murky waters of taxation.

In all fairness though, it remains every citizen’s duty to remit taxes on their incomes or earnings made, as and when they are declared.

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By Irene Koskei

MSA Finance Expert

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