A betting company operating in Africa approached us with concerns regarding the high tax burden imposed by a specific tax structure in their country. The country’s tax regime levies income tax on betting revenue (customer stakes minus payouts) and exempts VAT on sales, but it still requires VAT payments on operating costs. This setup results in limited deduction options and substantial tax costs, particularly on management fees, software payments, and other necessary services.
Optimised service charges by identifying strategies for reducing the fees charged to the operating company for software and service use, mitigating VAT and withholding tax obligations as much as possible.
Transfer pricing alignment to ensure that the revised fees were consistent with transfer pricing rules in the service provider’s jurisdiction, allowing for cost reduction while maintaining regulatory compliance.
Cost Structuring through additional insights on structuring agreements with service providers to reduce the impact of tax leakages, particularly VAT and withholding tax.
Although the client has decided to pivot towards a new business focus——our recommended strategies provided valuable insights. Had they been implemented, these strategies were expected to reduce tax leakage significantly, aligning tax costs more effectively with operational expenses and supporting compliance with transfer pricing and local regulations.
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