Lagos Enforces 5% Withholding Tax on Gaming Payouts

The Lagos State Government has announced the commencement of a 5% withholding tax (WHT) on gaming payouts, directing all licensed betting companies operating in the state to begin immediate automatic deductions from customers’ winnings.

The directive, issued in a public notice by the Chief Executive Officer of the Lagos State Lotteries and Gaming Authority (LSLGA), Mr. Are Bashir, confirms that the policy takes immediate effect and applies to players’ net winnings.

What he is saying

Bashir instructed all licensed gaming operators in Lagos to comply immediately with the new tax framework, in line with existing Nigerian tax laws and regulatory directives governing the gaming sector.

According to the notice, the 5% tax will be automatically deducted at the point of payout before winnings are credited to players. The deducted amount will then be remitted to the Lagos State Internal Revenue Service (LIRS) as the statutory tax authority.

He said:

• “The measure forms part of Lagos’ broader drive to strengthen tax compliance, transparency, and accountability in the rapidly expanding gaming sector.”

Under the new arrangement, players must provide their National Identification Number (NIN) in line with Know Your Customer (KYC) regulations.

Bashir clarified that all deductions and remittances will be handled strictly by licensed gaming operators, with proper documentation maintained for transparency. He also noted that the withholding tax deducted will serve as a tax credit for players.

• “All licensed gaming operators in Lagos State have now been formally directed to commence the deductions with immediate effect,” he added.

What this means

The enforcement of a 5% withholding tax, alongside stricter KYC requirements, has several implications for the gaming ecosystem:

• Players will receive 5% less than their net winnings at payout, as the tax is deducted at source.
• The tax deducted can be used as a tax credit for players in their overall tax filings.
• Operators must upgrade systems to automate calculation, deduction, and remittance processes.

The policy may reduce tax evasion and improve transparency in the fast-growing sector.

However, there are concerns that lower net payouts could discourage some players or push them toward unregulated platforms, potentially affecting engagement levels for licensed operators.

The move signals a broader effort by the state government to tighten regulation and formalise revenue collection within the gaming industry.

What you should know

In October 2023, the LSLGA warned residents against patronising unlicensed gaming companies and issued banning orders against operators offering gambling services without proper authorisation.

The Authority stated that operating without a licence breaches Section 33(3) of the Lagos State Lotteries and Gaming Authority Law 2021 and reaffirmed its commitment to enforcing compliance across the sector