INTRODUCING tax exemptions for cash prizes won at tournaments is a clear sign that the government is supportive of eSports, an industry, largely viewed as a hybrid between sports and entertainment, experts say.

“A tax break is indicative that this is a real industry with an ecosystem behind it, from coaches to management companies working with players,” says Esports Kuala Lumpur Association (ESKL) president Joel Goh.

The next step the government needs to take is to clearly define the type of eSports tournament that will qualify for the exemption, he says.

Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz announced the tax exemption under Budget 2022 to incentivise players. However, he didn’t specify which tournaments will be considered for the exemption.

Kevin Wong, the co-owner of team Sem9.Gank, says the government has to clarify if the exemption is applicable to both local and international competitions, and if the size of the cash prize will also be taken into consideration.

“eSports players need a proper structure to take part in tournaments and grow their career,” he adds.

It’s also a good chance for the government to “define” the industry, Wong says, as eSports management companies are currently registered as a management or marketing firm rather than a sports organisation.

Meanwhile, Negri Sembilan eSports Association president Muhammad Faries Faizal Shamsul says the exemption could spur more players to pursue eSports as a career and join professional teams for a better shot at winning major tournaments.

Without the tax exemption, earning a big cash prize could push players up the tax bracket which they may not be prepared for, he says, adding that it could be a “nasty surprise” to many.

The popularity of mobile game titles, such as League Of Legends: Wild Rift, says Wong, has allowed local teams to make more money. — Riot GamesThe popularity of mobile game titles, such as League Of Legends: Wild Rift, says Wong, has allowed local teams to make more money. — Riot Games

Goh feels that the exemption will also help younger players who may not realise they need to pay taxes, adding that the average age of players with ESKL is 16.

“If someone does the maths on their winnings based on eSports sites, they could be hit with serious back taxes,” he says.

Other than tournament money, Wong says pro players also get a monthly salary and income from sponsorships and live streams.

He estimates that basic salary makes up about 40% to 50% of a player’s earnings though this largely depends on whether they compete locally or internationally.

Smaller teams that only compete in local and regional tournaments that offer prizes ranging from RM5,000 to RM10,000 have to rely on their salaries more, he says.

However, the popularity of mobile game titles, such as PlayerUnknown’s Battlegrounds (PUBG) Mobile and League Of Legends: Wild Rift, he says, has allowed local teams to make more money.

“The prize pools for these games are quickly growing and there are more tournaments to participate in, especially in South-East Asia where mobile games attract more players than desktop titles,” he says.

Goh agrees, saying that winning many smaller tournaments is a good way to make money, adding that an eSport player’s base salary ranges from RM2,000 to RM4,000.

He says it’s more realistic to bet on smaller tournaments than hoping to win a huge amount in major competitions, which are mostly dominated by top-tier players.

Established titles like Defense Of The Ancients 2 (Dota 2), multiplayer online battle arena game, offer massive cash prizes but they are an annual event, he stresses.

The recently concluded Dota 2 tournament – The International 10 (TI 10) – had a prize pool of US$40mil (RM166mil).

Malaysian eSports athlete Cheng Jin Xiang or “NothingToSay” was part of China-based team PSG.LGD that won second place, netting US$5,202,400 (RM21.7mil) in prize money.

The high-profile win was applauded by Tengku Zafrul in his budget speech.

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