Tax on winnings from a free bet or bonus in Kenya: what the law says
Winnings from a free bet or bonus are taxed like other betting payouts. The operator deducts 5% withholding tax on withdrawals (Income Tax Act, Third Schedule, para 5(i)). A 5% excise duty also applies to amounts deposited for betting, and from 1 July 2026 the Finance Act, 2026 (s.36) extends that base to value the operator provides.
Key facts
| Fact | Value | As of | Source |
|---|---|---|---|
| Withholding tax on withdrawals | 5% for residents and non-residents (Income Tax Act, Third Schedule, Head B, paras 5(i) and 3(i)) | October 2026 | 1 |
| Who deducts it | The licensed operator paying the player (Income Tax Act s.35(3)(h) and s.35(1)(i)) | October 2026 | 1 |
| Excise duty on betting | 5% of the amount deposited for betting purposes (Excise Duty Act, First Schedule, Part II, para 4A as amended) | October 2026 | 3 |
| Excise base from 1 July 2026 | Includes money's worth provided by the operator, including credits (Finance Act, 2026 s.36(c)(ii)) | October 2026 | 2 |
| Excise remittance | By the bookmaker within 24 hours of the close of the day's transactions (Excise Duty Act s.36A) | October 2026 | 3 |
| Withholding tax on winnings | 20%, for lottery and prize-competition pay-outs only (Income Tax Act, Third Schedule, Head B, paras 5(r) and 3(y)) | October 2026 | 1 |
| Finance Act, 2026 in force | 1 July 2026 for the betting provisions (s.1(c)) | October 2026 | 2 |
A free bet or bonus has no tax of its own in Kenya. The money around it meets the two taxes that apply to all online betting: excise duty on what goes in, and withholding tax on what is paid out. Under the law in force in October 2026, both are charged at 5%.
What a bonus changes is the base. The Finance Act, 2026 widened the excise base so that it can reach value an operator gives you, not only money you send. If the product itself is new to you, start with what a free bet is and how it pays.
Which taxes touch a bonus bet?
| Tax | Rate | What it is charged on | Who handles it | Law |
|---|---|---|---|---|
| Withholding tax on withdrawals | 5% (residents and non-residents) | Money or money's worth paid or disbursed to a player's account by a licensee | Deducted by the operator before paying you | Income Tax Act s.2(1); Third Schedule, Head B, paras 5(i) and 3(i); s.35 |
| Excise duty on betting | 5% | The amount deposited for betting purposes, which from 1 July 2026 includes value provided by the operator | Remitted by the bookmaker within 24 hours | Excise Duty Act, First Schedule, Part II, para 4A and s.36A; Finance Act, 2026 s.36 |
| Withholding tax on winnings | 20% | A pay-out from a lottery or prize competition by a licensee | Deducted by the payer | Income Tax Act s.2(1); Third Schedule, Head B, paras 5(r) and 3(y) |
The Income Tax Act now uses two separate words. Section 2(1) defines "winnings" as a pay-out from a lottery or prize competition by a person licensed under the Gambling Control Act, and the Finance Act, 2026 (s.2(e)) inserted that definition. A payout from a sports bet is not on that list, so the tax that reaches it is the 5% on withdrawals.
Withholding tax on withdrawals: 5%
Section 2(1) of the Income Tax Act, as revised to 1 July 2026, defines withdrawals as "any amount of money, cash equivalent, or money's worth paid or disbursed to the account of a player" by a licensee. Section 2(d) of the Finance Act, 2026 substituted that definition with effect from 1 July 2026. Head B of the Third Schedule taxes "withdrawals made by punters" at five percent, in paragraph 5(i) for residents and paragraph 3(i) for non-residents.
The operator deducts the tax when it pays you, under section 35(3)(h) for residents and section 35(1)(i) for non-residents. Section 35(5A) then directs the Commissioner to pay the tax deducted from withdrawals into the Sports, Arts and Social Development Fund.
The definition contains no deduction for stakes or deposits; it describes the amount paid. Nothing in it separates winnings from a free bet from winnings on a cash stake. Once the money is paid out to you, it is a withdrawal like any other.
Section 76A bars a second assessment only on income whose withholding tax is also a final tax. Paragraph 5(i) does not call the 5% a final tax, while some items in the same paragraph do. For a large payout, that gap is a question for KRA or a tax adviser.
Excise duty on deposits: 5%
Paragraph 4A of Part II of the First Schedule to the Excise Duty Act charges excise duty on betting at five percent. In the text as at 1 July 2025 the base was "the amount deposited into a customer's betting wallet". Part III defined that phrase as money a customer transfers into the wallet kept by a licensed betting and gaming operator.
From 1 July 2026, section 36(b) of the Finance Act, 2026 replaced "into a customer's betting wallet" with "for betting purposes" and deleted the proviso that excluded horse racing. Paragraph 4B on gaming changed the same way, to an amount "deposited for gambling purposes".
Section 36A of the Excise Duty Act makes the bookmaker remit the duty to the Commissioner within twenty-four hours of the close of each day's transactions. KRA's public notice of 12 July 2025 states the same deadline.
How is a free-bet stake treated under the deposit base?
This is where a bonus matters. Section 36(c)(ii) of the Finance Act, 2026 inserted a new definition of "amount deposited" into Part III of the First Schedule. It covers the total value of money or money's worth "paid, transferred, credited, or otherwise made available for betting or gambling purposes" to a licensee.
The definition goes on: "whether provided by a player or the operator", whether or not the amount is held in an account, and whether or not it is converted into "chips, tokens, tickets, credits, or similar instruments". Read literally, that wording reaches a free-bet credit, because the credit is money's worth made available for betting and the operator provides it. The 2025 definition did not, since it covered only money a customer transferred.
Neither Act says how a bonus credit should be valued, and the KRA notice and FAQ cited on this page do not mention bonuses. The bookmaker is the one that remits the duty. Whether any of that cost reaches your balance depends on the operator's terms, which regulation 4(2)(l) of the Conduct Regulations (L.N. 112) requires to cover the payment of eligible taxes and statutory deductions.
Illustrative example: a free bet from deposit to withdrawal
The figures are invented to show the arithmetic. They assume a qualifying deposit, a free-bet credit that the operator treats as an amount deposited, a free bet that pays stake not returned (SNR), and a 5% deduction on the amount paid out.
| Step | Amount (KES) | Rule applied |
|---|---|---|
| You deposit | 1,000 | Amount deposited for betting purposes (para 4A as amended) |
| Excise at 5% on the deposit, remitted by the bookmaker | 50 | 1,000 x 5%; Excise Duty Act s.36A |
| Free-bet credit from the operator | 200 | "Provided by ... the operator" (Finance Act, 2026 s.36(c)(ii)) |
| Excise at 5% on the credit, if treated as deposited | 10 | 200 x 5% |
| Free bet wins at decimal odds 3.00, stake not returned | 400 | 200 x 3.00 - 200 |
| You withdraw the free-bet winnings | 400 | Withdrawal, Income Tax Act s.2(1) |
| Withholding tax at 5% | 20 | 400 x 5%; Third Schedule, Head B, para 5(i) |
| Paid to you | 380 | 400 - 20 |
The KES 50 and KES 10 are owed by the bookmaker; your balance shows them only if its terms pass them on. Free-bet winnings may also carry a rollover before they can be withdrawn, and the wagering calculator turns that condition into the turnover it demands. For a matched deposit rather than a free bet, see the deposit match bonus worked example.
How the betting excise base has changed
| Period | Rate and base | Source |
|---|---|---|
| Before 1 July 2025 | 15% of the amount wagered or staked | KRA public notice, 12 July 2025 (Finance Act, 2025) |
| 1 July 2025 to 30 June 2026 | 5% of the amount deposited into a customer's betting wallet; horse racing excluded | Excise Duty Act para 4A, text as at 1 July 2025; KRA public notice, 12 July 2025 |
| From 1 July 2026 | 5% of the amount deposited for betting purposes, including value provided by the operator | Finance Act, 2026 ss.1(c) and 36 |
Under the stake rule, duty followed each bet placed. Since 1 July 2025 it follows the money going in, and since 1 July 2026 the definition of that money is wide enough to include operator credits.
What KRA's FAQ page still says
KRA's FAQ page on betting, gaming and lottery tax still answers "Are winnings taxed?" by saying the Tax Laws (Amendment) Act reintroduced withholding tax on winnings at 20%. It defines winnings broadly, for every sector under the repealed Betting, Lotteries and Gaming Act. That wording predates the Income Tax Act as revised to 1 July 2026, where 20% applies to lottery and prize-competition pay-outs and betting payouts fall under withdrawals at 5%.
The same page describes betting tax at 15% of the revenue generated from betting. That is a tax on the operator's revenue, separate from the deduction on what you withdraw.
What this page does not cover
This page explains the law as written and is not tax advice. It does not cover pay-outs from lotteries and prize competitions, which the Income Tax Act taxes as winnings at 20%.
A bonus does not turn betting into income, and a tax deduction is one more reason to treat stakes as a cost. If betting is straining your budget, the help and limits page sets out the deposit and loss limits a licensee must offer.
Questions readers ask
Is there tax on free bet winnings in Kenya?
Yes, in the same way as other betting payouts. Paragraph 5(i) of Head B of the Third Schedule to the Income Tax Act taxes withdrawals made by punters at 5%, and the operator deducts it under section 35 before paying you. The 20% rate on winnings in the same Act applies to lottery and prize-competition pay-outs, not to sports betting payouts.
Do I pay excise duty on a bonus I did not deposit?
The bookmaker remits betting excise under section 36A of the Excise Duty Act. Since 1 July 2026, the Finance Act, 2026 defines the amount deposited to include money's worth provided by the operator, which on its wording reaches bonus credits. Whether any of that cost reaches your balance depends on the operator's terms; the KRA pages cited here do not mention bonuses.
Is the 20% tax on betting winnings still in force in Kenya?
Not in that form. The Income Tax Act as revised to 1 July 2026 defines winnings as pay-outs from a lottery or prize competition, taxed at 20%, and taxes withdrawals made by punters at 5%. KRA's FAQ page on betting, gaming and lottery tax still carries older wording about 20% on winnings from all sectors, which predates those definitions.
Who deducts the withholding tax on my betting withdrawal?
The licensed operator that pays you. Section 35(3)(h) of the Income Tax Act covers payments to residents and section 35(1)(i) covers non-residents, and the rate is 5% in both cases. Section 35(5A) directs the Commissioner to pay the tax deducted from withdrawals into the Sports, Arts and Social Development Fund established under the Public Finance Management Act.
Do I need to declare betting withdrawals in my tax return?
The law does not answer this plainly. Section 76A of the Income Tax Act bars a further assessment only where a withholding tax is a final tax, and the Third Schedule item for withdrawals does not use those words. Some neighbouring items do. If you receive a large payout, ask KRA or a tax adviser how to treat it in your return.
Sources
- Kenya Law (National Council for Law Reporting), Income Tax Act (Cap. 470), revised edition as at 1 July 2026, read on 29 October 2026.
- Kenya Revenue Authority (hosted PDF of the Act), The Finance Act, 2026 (No. 19 of 2026), Kenya Gazette Supplement No. 157 (Acts No. 19), read on 29 October 2026.
- Kenya Law (National Council for Law Reporting), Excise Duty Act (Cap. 472), revised edition as at 1 July 2025, read on 29 October 2026.
- Kenya Revenue Authority, Adjustment of Excise Duty Rates for Excisable Goods and Services by the Finance Act, 2025 (public notice, 12/07/2025), read on 29 October 2026.
- Kenya Revenue Authority, Betting, Gaming and Lottery Tax - FAQs, read on 29 October 2026.
- Gambling Regulatory Authority of Kenya, Gambling Control (Conduct of Gambling Operations) Regulations, 2026, Legal Notice No. 112 of 2026, Kenya Gazette Supplement No. 163, 30 June 2026, read on 29 October 2026.