The Special Secretariat of Federal Revenue of the ministry of finance published Normative Ordinance No 2,191 in the Official Diary of the Union on Tuesday. The ordinance outlined the tax framework for betting in Brazil after the Federal Revenue Service (RFB) confirmed its ruling for a personal income tax (IRPF) on betting.
Brazil is in the process of clarifying its betting laws. The country passed legislation to regulate sports betting and igaming on 21 December. President Luiz Inacio Lula da Silva signed Bill 3,626/2023 into law in late December.
There will be a 15% personal income tax in Brazil, as decided by the Economic Affairs Commission in November. However, the tax will only apply on net winnings of more than BRL2,824. The tax will apply at the time of winnings being paid and be taxed at source before a player receives their winnings. The betting operator will be responsible for both calculating and collecting the tax contributions.
The net prize will be classified as the difference between the value of the winnings and the amount bet after each sporting event or each igaming session. Losses incurred will be non-deductible.
National congress to discuss presidential vetoes
Today (9 April), there will be a session of the national congress to discuss 34 of President Lula’s vetoes.
The 24th item of the congress’ agenda will concern the tax on players in Brazil. Lula previously vetoed a proposed income tax exemption on player winnings of under BRL2,112. Lula vetoed six articles of Bill 3,626/2023 in total, with three of these covering taxation on bettors.
Rejection of the vetoes will require 257 votes from deputies and 41 from senators. For the vetoes to remain in place only one of those needs to be not met.
IBJR says tax on players “frustrates the industry”
The taxation on player winnings has caused concern from some who feel it will impact the health of the Brazilian gambling market when it is fully regulated.
Among those opposing the measures is the Brazilian Institute of Responsible Gaming (IBJR). It has labelled the tax framework as “harmful” and “legally questionable”.
The IBJR stated: “By requiring the taxation of prizes to be considered separately without allowing compensation for losses, the federal revenue’s understanding makes it possible to tax bettors who did not earn any effective income (because they lost more bets than they won), which weakens the constitutionality of the rule and has a perverse effect on the consumer.
“The rule will put at risk all the good work regulating the market done so far by the national congress and the MF Prizes and Betting Secretariat and it also fails to understand that the objective of regulation is to encourage positive behaviour from both operators and bettors, including contributing to tax collection.”
More Brazil regulation to come
Brazil is currently rolling out its betting regulation in four stages. This comes after lawyer Regis Dudena was appointed leader of the Regulatory Policy of the Prizes and Betting Secretariat (SPA) in April.
Ordinances already published include Normative Ordinance No 615. The ordinance banned operators from accepting credit cards or cryptocurrency payments.
Meanwhile, Normative Ordinance No 722 outlined exceptions for data centres to be located outside Brazil. These circumstances included the countries where the centres are located holding an international legal cooperation agreement with Brazil.
Brazil is planning to fully announce its regulation by the end of July. Rules on advertising and igaming requirements feature in stage three of the rollout. The fourth and final phase concerns how industry contributions are put into socially responsible causes.