Professional gamers and eSports athletes should be aware that their winnings from competitions – both cash and non-cash – are taxable, and team managers need to ensure that they’re fully compliant with South African tax laws.
This is according to South Africa’s gaming authority, Mind Sports South Africa, which says that professional players are recognised in SA law as employees of the teams for which they play.
The MSSA is responsible for the governance and promotion of historical figure games (also known as war games), board games (such as Diplomacy, Checkers, Draughts, Morabaraba, Sport Stacking, etc), card gaming, robotics, and eSports (whether they are played on ‘cell phones, consoles, personal computers or similar).
“There is a specific inclusion in the gross income definition (the definition used as the starting point to determine an individual’s taxable income) which states that amounts received in relation to services rendered – even if it is a voluntary award – will be included in gross income and subject to tax,” the body said.
Since a professional eSports athletes would be considered to be an employee of the company for which they play, if such employee receives a reward related to their job function, it will be considered gross income as it is linked to services rendered.”
Winning prize money in a competition if you are a professional eSports athlete would be seen by revenue authorities (SARS) as being related to a job function, the group said. Whether the prize could be cash or otherwise, the prize will still be subject to tax.
“If it is a non-cash prize, the monetary worth of that specific item will be included in gross income and subject to tax,” the group said.
The body warned that all companies (which often call themselves multi-gaming organisations or MGOs) running professional teams need to register with the revenue authorities in regard to declaring their winnings and the withholding of tax on their athletes.
Professional gaming and eSports is a growing activity in South Africa, with many MSSA-affiliated high schools competing in professional gaming competitions and handing out colours to students that excel.
Prize pools for local competitions can easily venture into the millions of rands, with top players earning hundreds of thousands of rands. International competitions, such as the DOTA 2 International going as high as a R350 million prize pool for competitors.
According to eSports tracker, esportsearnings.com, top professional gamers in South Africa earned between R170,000 and R460,000 in 2018.