As Brazil continues to outline its betting laws, further clarity was achieved when the Special Secretariat of Federal Revenue of the ministry of finance released Normative Ordinance No 2,191. Announced in the Official Diary of the Union this past Tuesday, the ordinance detailed the impending tax framework for betting, in the wake of the Federal Revenue Service’s (RFB) affirmation of a personal income tax (IRPF) applicable to betting within the country.
The legislative wheels have been set in motion for some time, with the country having already passed crucial legislation aimed at regulating sports betting and igaming on December 21st. These regulatory efforts were bolstered when President Luiz Inacio Lula da Silva signed Bill 3,626/2023 into law at the end of December, setting the stage for a more structured betting environment. Under the new tax regime, Brazilian bettors will now be liable for a personal income tax amounting to 15%, following the November decision by the Economic Affairs Commission. Nevertheless, this tax will only take effect on net winnings that exceed the BRL2,824 threshold.
The mechanisms of this tax are such that they will be applied at the point of winning payment, with the tax deducted at source prior to the player’s receipt of their winnings. Consequently, it is the betting operator who bears the responsibility of calculating and collecting the tax contributions. The ‘net prize’ has been defined as the difference between the value of the winnings and the amount bet, calculated after each sporting event or igaming session. Importantly, losses will not be deductible.
April 9th will mark a significant day in Brazil’s legislative calendar, as the national congress convenes to deliberate on 34 vetoes issued by President Lula. Of particular interest is the 24th agenda item, which pertains to the taxation of player winnings in Brazil. President Lula previously rejected a proposal to exempt income tax on player winnings below BRL2,112. In total, he vetoed six articles of Bill 3,626/2023, with taxation on bettors being a significant portion of these.
The process of overriding these vetoes is exacting, necessitating 257 votes from the deputies and 41 from senators. The absence of either count would guarantee the continuation of the vetoes.
The taxation of player winnings is not without its critics, with some expressing apprehension that it could negatively affect the burgeoning Brazilian gambling market once full regulation is achieved. The Brazilian Institute for Responsible Gaming (IBJR) has been vocal in its opposition. The IBJR criticizes the tax framework as “harmful” and “legally questionable,” stating that the taxation of prizes considered separately, without compensating for losses, could effectively tax bettors who have not realized any substantial income.
Brazil’s regulatory rollout is occurring in four stages, a process led by newly appointed Regis Dudena, leader of the Regulatory Policy of the Prizes and Betting Secretariat (SPA). Among the published ordinances thus far is Normative Ordinance No 615, which prohibits operators from accepting credit card or cryptocurrency payments. Another, Normative Ordinance No 722, lists exceptions for locating data centres outside Brazil, permitted when the hosting country has an international legal cooperation agreement with Brazil.
As the country gears up to finalize its betting regulation by the end of July, anticipation grows for the third stage—featuring rules on advertising and igaming requirements. The final stage will outline how contributions from the industry can be channeled into socially responsible causes. The meticulous advancement towards a well-regulated betting landscape in Brazil signals a new era for bettors, operators, and the government alike.
