After five years of anguish and an endless struggle in the iGaming sector, Brazil has just entered the modern regulated world of sports betting and iGaming. President Lula sanctioned Bill 3626/2023, now known as Law 14790, with vetoes only on certain aspects of commercial promotions outlined in the bill (Articles 53, 55, 56, and Annex I), and three paragraphs of Article 31, which deals with taxation on the bettor.
The law maintains a 15% tax rate on the net prize for any amount, no longer exceeding the first bracket of the Income Tax. Another vetoed paragraph deals with the assessment period for tax purposes, which was originally set annually. The Federal Revenue will determine, through a decree, the frequency of tax collection.
The industry's great expectation revolved around the issue of taxation on the bettor, especially after the Federal Revenue sent a letter to the Civil House this week, requesting the veto of the article related to the 15%, aiming to revert the taxation to the initially proposed 30%.
President Lula vetoed three sections of the law, guided by the Ministry of Finance. The law and the justifications for the vetoes were published in an extra edition of the Official Gazette this Saturday.
The most significant veto relates to the procedures for taxing prizes received by bettors. Lula vetoed a section that allowed the non-taxation of gains below $ 435, an amount equivalent to the Income Tax exemption bracket.
According to Lula, maintaining this provision "would result in a differentiated Income Tax taxation from that applied in other lottery modalities, thus establishing an unjustified tax distinction."
The other vetoes concern proposals for rules for the authorization of commercial promotions and the filing of complaints, investigations, and accountability related to the distribution of prizes and drawings up to $ 2,000.
It is now up to the Ministry of Finance to issue the regulatory decrees and other provisions for the sector to formalize. Once the legal documents are published, sports betting houses will have 180 days to formally submit their license applications and adapt to the new rules.
As part of the economic package to achieve a zero deficit target in the 2024 accounts, the government aims to have all regulations published in January, and companies start the accreditation process.
Distribution of taxes:
10% for social security, 0.82% for basic education, 2.55% for the National Public Security Fund, 1.63% for clubs and athletes, and 3% for the Ministry of Sports. Regarding the prize, the bettor will be taxed 15% of the Income Tax.
With regulation, the Federal Government is expected to collect over $ 618.000.000 per year. After Congress recess, the plan is for the MP to progress into a Bill. The MP created positions for the new Department of Betting and Lotteries in the Ministry of Finance, indicating the proximity of regulation.
Companies in sports betting:
According to the text, non-Brazilian companies can operate but need a specific headquarters in the country. To enter this market, companies must declare their intention at least 30 days in advance and pay $ 6.000.000
Benefits:
Long-awaited since 2018, regulation, in addition to generating tax revenue, is expected to create new jobs, make betting safer, and prevent scams and issues such as result manipulation.
With the argument that clubs would lose income, sponsorship from betting houses to athletes, stadiums, teams, and competitions remains allowed. With changes in the project, the Federal Government estimates collecting $ 2.060.000.000 in taxes, well beyond the initial estimate of $ 144.300.000.
Betting houses wanting to operate in Brazil will need to be registered in the country. After the Bill is approved, houses will have 180 days to complete the necessary accreditation.
Commitment to Responsible Gambling and combating addiction will also be key points in establishing the betting market in the country, as well as a monitoring system to prevent any form of manipulation, whether in games or within systems.
Who cannot bet?
According to the MP, those prohibited from betting include individuals under 18, people with access to lottery systems, those who may influence games, individuals listed in national credit protection databases, public officials involved in fiscal supervision, and football players and officials.
Source: GMB
