Brazil’s Economic Affairs Commission Has Approved a Reduced Tax Rate of 12% for Licensed Sports Betting Operators

November 27, 2023 | Tax

Bill 3,626/23 and the Developments Related to Sports Betting in Brazil

BRAZIL (November 24, 2023) — The Economic Affairs Commission (CAE) has approved a reduced tax rate of 12% for licensed operators in sports betting. Player prizes will be taxed at a rate of 15%, which is lower than the initially proposed 30% by the Ministry of Finance.

The CAE believes that lower tax rates are essential to attract consumers and businesses to the newly regulated federal sports betting market.

Former rapporteur Adolfo Viana proposed the inclusion of online gambling (igaming) to the bill. The Chamber of Deputies approved the text with the CAE’s endorsement.

However, the bill will return to the Chamber of Deputies if the Senate approves it or introduces changes. Senators Eduardo Girão and Carlos Portinho have expressed opposition to the inclusion of online casinos in the bill.

The Ministry of Finance’s proposal includes a licensing fee of BRL 30 million (€5.5 million) for a five-year license, valid for three brands. Operators must have a domiciled business in Brazil, with a Brazilian partner holding at least 20% of share capital.

Tax Distribution:

The tax is to be distributed across various sectors as follows:

10% to the Ministry of Education
14% to public security, including the National Public Security Fund and Sisfron
36% to Brazil’s Ministry of Sports (to be shared among sports organizations, national bodies, and charities)
28% to tourism (Embratur and the Ministry of Tourism)
1% to the Ministry of Health
0.5% to civil society agencies (Fenapes and Fena Pestalozzi)
0.5% to the Federal Police operational fund.

The Ministry of Finance will be responsible for overseeing taxation related to sports betting.

Taxation of Player Prizes:

- Operators will need to register customer winnings through Brazil’s Personal Income Tax (IRPF) registry.
- Taxes on player prizes will be charged on a yearly basis, with winnings below BRL 2,112 (€400) being exempt.
- Players will have 90 days to claim prizes, and unclaimed winnings will be directed towards education and disaster relief funds.

The upcoming Senate plenary vote on November 28 will play a crucial role in determining the fate of the legislation.

SOURCE: LI Contributor.