June 19, 2023
Ghana Revenue Authority issues 'Practice Note on Taxation of Gross Gaming Revenue and Winnings from Lottery Operations'
The Commissioner-General (CG) of the Ghana Revenue Authority (GRA), the officer responsible for the administration of the tax laws, has issued a "Practice Note on the Taxation of Gross Gaming Revenue and Winnings from Lottery Operations" under the Income Tax (Amendment) Act, 2023, Act 1094, which was passed pursuant to the tax measures that the Government introduced in the 2023 Budget Statement and Economic Policy (the 2023 Budget) to raise revenue to support various sector reforms and for other matters.
This Alert highlights the key matters set forth in the Practice Note.
Under the CG's powers to issue Practice Notes (PN) for the interpretation of tax laws under the Revenue Administration Act, 2016, Act 915 (as amended), the CG has issued a PN interpreting provisions on the taxation of gross gaming revenue and winnings from lottery operations under Act 1094.
The PN is titled "Practice Note on Taxation of Gross Gaming Revenue and Winnings from Lottery Operations under the Income Tax Act, 2015, Act 896 (as amended)" and numbered DT/ Lottery/01/2023. The PN was issued and signed by the CG of the GRA on 5 June 2023. Key points in the administrative guidelines include:
1.0 Taxation of Gross Gaming Revenue (GGR) and Winnings from Lottery Operations
The PN seeks to
1.1 Definition of terms
The PN defines the following terms:
Types of gross winnings of lottery operations:
1.2 Application of the PN
The PN applies to
1.3 Determination of GGR
GGR for the respective lottery operation shall be determined as follows:
To adhere to the methods in calculating GGR as outlined in the table above, the operators must keep records and follow procedures that are verifiable in accordance with international standards.
1.4 Tax treatment of GGR
1.5 Sources of gross winnings
The sources of gross winnings include lotto from the National Lottery Authority (NLA), lotto from private lotto operations, sports betting, casino games, route operations, marketing promotions, remote interactive games and other games of chance.
1.6 Operators required to pay tax on the GGR
Operators who are required to pay a 20% tax on the GGR include private lotto operators, sports betting operators, casino operators, route operators, remote interactive games and other games-of-chance operators.
1.7 Withholding tax on gross winnings from lottery
1.8 Withholding tax on gross winnings by retail scheme operators
1.9 Monthly negative GGR
An operator who realizes a negative GGR in a particular month may carry forward the negative GGR to the subsequent month and deduct it from a positive GGR realized.
In effect, the operator may not be liable for the tax in the month in which the operator realized a negative GGR.
2.0 Monthly GGR transaction return
Persons engaged in lottery operations are required to file a GGR transactions return and pay the GGR tax monthly. The filing of the GGR transaction return and payment of applicable taxes are due on or before the 15th day of the month following the month to which the transaction return and payment relate.
2.1 Annual return
Persons engaged in lottery operations are required to file their annual GGR tax returns and pay any outstanding taxes on or before the last day of the fourth month following the year of assessment to which the returns and payments relate.
2.2 Over/underestimating GGR tax
The GRA may issue an assessment notice to a lottery operator where it determines that the lottery operator underpaid the GGR tax2 for a given year of assessment. The assessment notice will cover the difference to be paid by the lottery operator, including any applicable interests and penalties.
Where the GRA determines that the lottery operator overpaid the GGR tax3 for a given year of assessment, the GRA will allow the operator to take the excess payment as credit in the month(s) following the determination of the overpaid GGR tax.
2.3 Withholding on gross winnings
Lottery operators are required to withhold tax on gross winnings, file a withholding tax return, and make payment for amounts withheld monthly not later than the 15th day of the month following the month to which they relate. A "nil" return is required to be filed by a lottery operator who has no withholding tax payment for a particular month not later than the 15th day of the month following the month to which it relates.
2.4 Revenue Monitoring System
For assessing the correct tax from lottery operations, the CG may
2.5 Modification of software
The PN provides that lottery operators are to modify their software to display bet/stake amount, possible winnings before tax, tax rate, tax withheld and possible winnings after tax on the bet slip and store the values for reporting. This measure is to ensure that the Act is effectively implemented and administered.
Paragraph 7 of the Practice Note provides some illustrations on how the GGR and GGR tax are to be calculated.
For additional information with respect to this alert, please contact the following:
Ernst & Young Chartered Accountants, Accra
Ernst & Young Société d'Avocats, Pan African Tax — Transfer Pricing Desk, Paris
Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London
Ernst & Young LLP (United States), Pan African Tax Desk, New York
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
1 "Small" means gross winning below GHS 100
2 "Underestimation of the GGR" means the total amount of the GGR tax payment made for the year is less than the total monthly GGR tax liability for that year.
3 "Overestimation of the GGR" means the total amount of payment made by the lottery operator for the year exceeds the GGR tax liability due.