The Betting Exchange Issue.......Again

I recently attended a seminar on taxation and had the opportunity to formally pose questions regarding lotteries, betting exchanges, tax, legality et al.

I have subsequently received a written response from the legal team who, although asking not to be quoted or named, felt that I could conduct my affairs with reasonable confidence as follows :

Let's start off with the easy part :

Lotteries : Participation in offshore lotteries is illegal no matter how you do so.

( I had suggested the following scenario : You travel to the UK. Whilst there you purchase a lottery ticket and win. How would you repatriate the funds if you wished to do so? )

According to the opinion I got the winnings would/could be regarded as proceeds from a criminal act and be liable for confiscation!

Unlike the scenario which I had described the majority of lottery tickets for overseas lotteries are apparently purchased using credit cards. I believe steps have already been taken through banking channels to block these transactions at source through the codes and account numbers of the lottery bank accounts.


With regard to betting exhcanges there appears to be little wrong with the method which I have suggested quite a number of times through this site. For those who have missed it I shall repeat it :

1.)All taxpayers in good standing with SARS are allowed to invest R 4,000,000 offshore. This is a 'lifetime allowance' but one which has been regularly increased from R750,000 since it was introduced.

2.)There is nothing illegal in your investing this amount in, for example, a UK bank account.

3.)Thereafter there is nothing to stop you depositing an amount ( any amount ) into a betting exchange and transacting business on that exchange.

4.) HOWEVER - my sources suggest that you are liable for declaring your profits and paying tax on those profits.

I'm no expert but this is the first opinion from a reputable source that I have been able to obtain. It certainly smacks of logic but obviously I cannot guarantee that it would stand up to scrutiny or challenge from SARS. Nevertheless it does rather debunk the occasional general sabre rattling and veiled threats which we get from various inexpert sources from time to time.

Thanks again Garrick

If you opened a bank account in the UK, as most as have done, your Betfair profits are returned to the UK bank account.
Your normal UK bank account debit card can be used at any RSA ATM and you can withdraw your funds in RANDS.

Given the following fact's
RSA and UK signed a double tax treaty a few years back (2 or 3....cannot remember the date)...which states that if I had paid tax in one of the countries, I am exempt from paying tax in the other.

now whether I invest in shares on the London Stock Exchange, sell the shares at a profit........
or trade on an exchange FX exoitics, be currencies, options, shaes, sell and make a profit..........
or trade on Betfair, lay the fav, buy a winnin ticket on a winning horse, sell and make a profit.........
my taxes are paid. Zero taxes are paid because these profits are exempt from taxes........

SARS and your consultants needs to understand the following concept...
BINARY TRADING or ALL or NOTHING TRADING
Banks run software packages such as MUREX, SUMMIT, WALLSTREET SYSTEMS
on these platforms they trade without paying tax on the profits
ie COMPANY A share price is R100 now
they will price up the following options (same as bookmakers boards
BY DECEMBER 31 2010 company A will trade at
R200 - 40/1
R180 - 33/
R160 - 20/1
R150 - 14/1
R140 - 8/1
R130 - 3/1
R120 - 15/10
R110 - evens
R100 - 3/10
R90 - evens
R80 - 15/10

Soon they will price CHELSEA to win against ?????
10 - 0 40/1
9 - 0 33/1
8 - 0 20/1
7 - 0 16/1
6 - 0 12/1
5 - 0 8/1
4 -0 4/1
3 - 0 2/1
2 - 0 15/10
1 -0 6/10


now...maybe the banks must all apply for gambling (bookmakers) license as they have been trading like this for years...
and....BETFAIR have to apply for a Banking license as they have been allowing BINARY trading for years.

SARS is a building
the people working for SARS have no clue with regards to the applications of the tax treaty's between RSA and other countries, and how to apply these tax treaty's within the domestic tax laws.
the treaty is signed by govenment people that have no uderstanding of the implication the treaty will have on the domestic tax laws.
SARS on the other hand only know and focus on the domestic tax laws, with no regard for the tax treaty signed by government.
neither have the big 5 consultants...see its now the big 6 in EU..
they just speculate and get opinions from attorneys.
these opinions by the law firms are based on their limited understanding of the implications of a tax treaty and domestic tax laws.
the court cannot even give a ruling as the judge have no understanding either or experience in these matters..


as for this
1.)All taxpayers in good standing with SARS are allowed to invest R 4,000,000 offshore. This is a 'lifetime allowance' but one which has been regularly increased from R750,000 since it was introduced.

SARS have no history of how much a person takes out...
the R750,000 during the 1990's and now up to the R4,m...they have forgoten who took R750,000 in the 1990's.
the IT system during that time did not cater for it.

as for this
According to the opinion I got the winnings would/could be regarded as proceeds from a criminal act and be liable for confiscation!

SARS must then start with the banks today...confiscate everything...they are gambling(BINARY TRADING) using MUREX...any different than BETFAIR....also no tax on winnings

How come we can`t get a Reply from SARS direct on this matter? are they untouchable or do they not have an answer?

Will attempt to get a reply.

They cannot enforce the law. If they do, you are exempt because of the tax treaty.
best to put fear into the people.
money leavng the country causes the currency to weaken...
be it holiday money..
buying horses in South America...........
be it me transferring my savings to a UK bank and keeping it in pounds.......

the main idea is..
limit the citizen to spend his money in the local market...
economy picks up..
SARS collect VAT
SARS colect TAX from company selling to domestic market...

listen to your Minister of finance..
banks cannot comply with the new BASEL III (pillar 1) as the RSA banks needs an additional R600 billion in cash to get their cash holdings to 8% (from 6%)
.......3.2 million tax payers in RSA ....2.7 million pays 68% of the taxes....+9,000,0000 taxpyers in 1999...........
for RSA to be successful, the taxpayers needs to be at the same level as 1st world countries..ITALY 70,000,000 citizens - 21,000,000 taxpayers..
interest rates must drop to 1 st world interest rates..
house loans between 1.8% and 4.9%
car HP loans between 4.5% and 7.6%

it can never happen in RSA...
banks will fold same day as they are not running at profitable %

I have had about 10 SARS audits on me and my companies in the last 10 years.
once 4 times in the same month...
never been found guilty...
never been taken to court on tax or non payment of overseas winnings (profits)...

but then as a bookmaker...
also had 4 audits in the same month by the gambling board...bruce had to do the audits...
makes you think....
Hannes, Bruce and the other losing bookmakers....

How is the cabbage business Andre?

they are eating around 600,000 now per month....lol....the smell will eventually hit the CBD...

could not take RSA tote bets on BETFAIR this morning.....any idea...it said...technical errors....

Good morning David.

I read the various comments in this regard last night.

My area of “expertise” is basically company taxation.

The taxpayer will have to be classified as a professional gambler to be taxed on winnings and to be able to deduct losses.

I have no idea how this is done but your tax office will be able to explain.

To give a proper answer to the questions raised I would have to know precisely how betting wins are

taxed in the UK, or whatever tax jurisdiction is involved.

I was under the impression that there was no betting tax in the UK?

I would have to know if there are withholding tax deductions on payouts from the UK to South Africa,

or into UK accounts conducted by SA citizens.

I would have to thoroughly look at the SA “source” rules.

Basically South Africans are taxed on their worldwide income. The tax return does guide the taxpayer and all income should be declared.

I would say that betting income must be included if it is generated from funds emanating from S.A.

I would have to look at the applicable DTA (Double Taxation Agreement).

There is also section 6 quat of the Income Tax Act No. 58 of 1962,

which covers foreign tax rebates that can be claimed if there are no DTA’s.

Then of course there are the exchange control rules administered by the SA Reserve Bank.

SARS is obliged to give rulings if so requested by a taxpayer. The taxpayer may be required to pay for a ruling.

I do not punt overseas and I therefore have not bothered with any of this.

To conclude, before I could give a comprehensive reply I would have to do quite a bit of work.

I do not give opinions on tax matters lightly.

At the moment I unfortunately do not have the time to go down this well.

Once I have retired and decide to punt every day I will do so.

GOOD PUNTING!!!!

Regards

Hullo again Dave.
> I forgot about the Eighth Schedule to the Income Tax Act, which deals
> with Capital Gains Taxation (CGT).
> I enclose a brief comment on paragraph 60 of the 8th Schedule dealing
> with gambling.
> I mentioned professional gambling in my previous e-mail.
> I still believe that SARS can regard a taxpayer as a professional
> gambler.
> However, I have been led to believe that this does not happen easily as
> SARS is not keen to allow losses.
> All in all, it is quite a complex matter and if I was doing a Masters In
> Taxation it may well be a good subject for a thesis.
> I do not know if one has been done.
> Regards

Sorry this one if for the hard of hearing.