In a significant move towards the regulation of the gambling industry, Brazil has set a deadline for gambling companies to obtain necessary authorisations to operate within the country. Published in Brazil’s Official Diary of the Union on Tuesday, May 21, Normative Ordinance 827 lays out the requirements and procedures that gambling companies must follow to gain licencing in Brazil.
Under the new ordinance, successful applicants will be granted a licence that remains valid for five years, contingent on the payment of a BRL30 million (£4.6m/€5.4m/$5.9m) fee. Companies will be permitted to operate up to three online commercial brands.
Furthermore, any gambling companies active in Brazil at the time when Bill 14,790/2023 was published must achieve authorisation by December 31, 2024. Any company continuing operations without proper authorisation from January 1, 2025, will be subjected to penalties.
One critical stipulation for obtaining a licence is that companies must have their headquarters and administrative operations within Brazilian territory. Subsidiaries of foreign gambling firms must ensure that a Brazilian entity holds at least 20% of their share capital. Companies based overseas will not be eligible for authorisation.
Moreover, only limited liability and joint-stock companies will be considered for licences, and they must possess a “very personal, non-negotiable, and non-transferrable character.” Additionally, authorisation comes under scrutiny during mergers, splits, incorporations, transformations, or modifications in direct or indirect corporate control. In such cases, companies must submit documentation displaying compliance to the Secretariat of Prizes and Bets (SPA) of the Ministry of Finance within 30 days.
To maintain compliance during any corporate changes, companies must consult with the SPA, which will have 150 days from receiving the documentation to assess the situations that may affect the authorisation status.
The detailed process for authorisation application in Brazil includes multiple qualifying criteria. This comprises legal qualification, tax and labour regularity, suitability, economic-financial qualification, and technical qualification. All foreign-language documents must be translated into Portuguese by a Brazilian-sworn public operator.
For legal qualification, gambling companies must furnish identification and registration forms for controllers and holders of qualified holdings along with a declaration of compliance with payment rules and certification from the Central Bank of Brazil.
. Tax and labour regularity must be evidenced through a joint certificate on federal taxes from the Special Secretariat of Federal Revenue and the Attorney General’s Office of the National Treasury.
Furthermore, a suitability requirement includes a Federal Police certificate confirming a negative criminal record for controllers, holders of qualified participation, and final beneficiaries. A history of bankruptcies, tax evasion, or embezzlement convictions will result in disqualification from obtaining a licence.
Equally important, legal entities are required to prove a financial reserve of at least BRL5 million and provide evidence of a minimum share capital valued at BRL30 million. They must also demonstrate a net worth of at least BRL30 million. Newly formed companies, less than a year old, must submit an opening balance sheet, a projected cash flow for the next two financial years, and a report signed by a financial director or an equivalent role outlining their economic-financial hypotheses.
Additionally, technical qualification mandates the provision of technical certificates for betting systems. Normative Ordinance No 722, previously published, outlines the technical requirements for such systems, including the need for certification from entities recognised by the Ministry of Finance. Companies are also required to elaborate on their customer-service systems to achieve authorisation. These systems need to be based in the country and must offer Portuguese-language support through a free electronic and telephone channel available 24/7 to handle complaints and other issues.
A critical aspect of licensure includes having at least one member of the control group with no less than three years of experience in the gaming industry. Entities must also demonstrate they have held or currently hold a qualified shareholding in legal entities dedicated to gambling activities.
Brazil embarked on its journey towards a regulated betting market towards the end of 2023. On December 21, 2023, the Chamber of Deputies voted to approve legislation aimed at regulating sports betting, eventually encompassing igaming in the bill. President Luiz Inacio Lula da Silva later ratified the new regulatory framework, signing it into law on December 30, 2023.
The comprehensive betting regulations are scheduled to be fully announced by the end of July 2024 and will be enacted in four phases. This new structure includes a prohibition on credit card and cryptocurrency payments, as stipulated in Normative Ordinance No 615. Additionally, Normative Ordinance No 2,191 imposes a 15% tax on player winnings exceeding BRL2,824.
Further regulations, including advertising procedures and the allocation of industry contributions to socially responsible causes, are still to be announced.
