|More-and-more events are paying out prize money.|
In such competitions only specific MGO's,clubs or athletes are invited or permitted to participate according to the rules of such competition.
The successful MGO's, clubs or athletes on receiving a sum of money for their performance, such monies shall constitute prize money. Successful MGO's, clubs or athletes will receive different amounts depending on their position in the competition when the final results are determined.
The income tax implications are simple.
The monies that first accrue to a MGO/club before distribution will form part of the MGO's/club’s gross income and will be fully taxable. Thereafter, provided that all requirements are met, the club will be able to claim a deduction under section 11(a) on the portions distributed to the players which will be taxable in the hands of the athlete as remuneration.
The general principle applicable to this type of receipt or accrual is applied by asking whether or not the recipient, in this instance the MGO/club, received or will receive the prize money on its own behalf, or solely on behalf of the player or players concerned.
Where paid directly to an individual athlete, there may also be VAT implications as well as the athlete would have to register as a provisional tax payer. By registering as a provisional taxpayer, such athlete woul also be able to claim deductions under section 11, as read with sections 23(g) - 23(f) of the Act.