Brazil signs off on revenue-based tax system for sports betting market

Brazil’s government has signed off on regulatory changes that will see the country use a tax system based on gross gaming revenue (GGR) for sports betting, rather than turnover. 

The new law regarding taxation has been published in Brazil’s Official Gazette.

Brazil’s new tax regime for betting

Brazil’s President Jair Bolsonaro has signed a federal decree that regulates tax regimes for several industries, including sports betting, into law.

Bolsonaro signed the modifications to chapter 30 of Law 13,756, which came into effect in 2018, effectively changing the tax base that applies to sports betting. 

The federal decree’s mandate comes from Provisional Measure 1,034/2021 which was previously approved by the Plenary of the Chamber of Deputies of Brazil in June.

Among its several amendments, the law made amendments to 30 proposed laws relating to sports betting. This included a restructuring of Brazil’s tax regime for betting.

Now Brazil’s sports betting taxation regime will be based on GGR as opposed to the original proposal of taxing operators based on gross wagering value applied to customer bets.

The tax base is calculated after winnings and taxes on winnings are paid out, along with social security contributions.

Under the bill, funds raised from the new tax system will be used “to guarantee the functioning and to improve the physical and pedagogical infrastructure of educational establishments”

According to the bill that was approved in June, taxes from operators will go to social security, health, and education, while 95% of the proceeds will cover the costs and expenses of the state.

Meanwhile, 0.82% of revenue will go to schools, 2.55% will go to the National Public Security Force (FNSP) and 1.63% of revenue will go to Brazilian sports bodies that give the rights to the use of their names, brands, and symbols.

The new regulation also establishes that companies operating any type of lottery and paying prizes in cash or real estate assets will be subject to additional financial controls.

Sports betting in Brazil

Brazil legalised sports betting back in December 2018, with the passage of Law No. 13756/2018. 

Last August Bolsonaro formally added sports betting to countries agenda, signing a decree to add sports wagering to the country’s Investment Partnership Program (PPI) portfolio and national privatisation programme.

In January 2021, Waldir Eustáquio Marques Jr., an undersecretary with the Ministry of Economy, said that the rules to govern the sports betting market will be finalized by the end of July 2021.

Licence applications will then be reviewed and issued as appropriate with the first legal sports bets expected to be placed in early 2022.

Brazil is still going through the drawn-out process of regulating sports betting. The process has been delayed several times due to changes in the proposed regulation to use a concession model instead of a typical licensing structure.