Sports betting was authorized in Brazil in 2018 by Law 13,756/2018 and, despite the deadline for regulation having ended at the end of 2022, they still have not received the due standardization, either in the regulatory field, or in the aspect of taxation of operators of online betting, known as “bets”.
Currently, due to this regulatory vacuum, all “bets” announced in Brazil are established abroad, which means that the country fails to collect billions of reales annually with the taxation of profits arising from such activity. Hence why the regulation of sports betting operators is increasingly urgent.
Since March of this year, Bill 845/2023 has been pending in the Senate and, in May, a draft proposal for a provisional measure (PM) was presented by the Ministry of Finance to other government departments. News also circulated of a possible negotiation between the mayor, Arthur Lira (PP-AL), and the minister of Institutional Relations, Alexandre Padilha, to transform the PM for sports betting into a bill, but until then there had been no news of any developments on the matter.
The norm would oblige “bets” that advertise their brand on uniforms of football clubs in the country and that intend to receive bets from Brazilian IPs to establish themselves in Brazil, with the payment to the government of an operation license, the submission to a series of regulatory aspects and the payment of taxes in the country, with emphasis on the creation of a contribution levied on the gross gaming revenue obtained by such companies (“Gross Gaming Revenue” – GGR).
As for bettors, art. 31 of Law 13,756/2018 establishes withholding taxation of prizes received at an income tax rate of 30%, with exemption, for each gain, on the amount of the prize that exceeds the value of the first range of the monthly incidence table of the Individual Income Tax (IRPF), currently R$ 2,112 (US$ 435).
According to information from the special adviser to the Ministry of Finance, José Francisco Manssur, there was a discussion about reducing taxation to 15%, but on all bets and without an exemption range. However, after verifying that 75% of the prizes are below R$ 2,112 (that is, within the exemption range), as well as participating in meetings with companies and associations, they decided to maintain the existing provision in Law 13,756/2018.
Taxation is the same applied to lottery prizes, which has been criticized by industry entities, which highlight essential differences between the types of bets. In this sense, they observe that while the conventional lottery is based solely on luck, since the probabilities of an event happening are fixed, immutable and mathematically measured, sports betting has variable probabilities and pricing that necessarily involves analysis of statistics, performance indices, circumstantial and climatic factors and a series of other aspects that can change the odds.
Thus, unlike conventional lotteries, where the game is purely random and does not require any skill, in sports betting there are conditions for the player to be a professional, taking advantage of the study of the probabilities of the event, so that it can earn gains of considerable, constant and long-term values.
Another important aspect of differentiation is that, in lotteries, the amount to be received is uncertain and depends on the number of winners, while in sports betting the value of the prize is defined even before the end of the match. For this reason, in fact, it is said that in the lottery the bet is against other players, since the more winners there are the smaller the prize, while in sports betting the bets are placed against the house, since the value of the prize does not depend on the number of winners.
The defense of a system in which prizes paid to players are not taxed takes into account such differences, combined with the finding that gamblers lose more money than they win, with a study demonstrating that there would be about a 97% chance that the profit of the gambler actually be at a loss.
The fact that there is still no regulation in Brazil does not mean, however, that bettors do not owe taxes on the values of prizes received from foreign “bets”. On the contrary.
Through Consultation Solution Cosit 61/2018, the Federal Revenue Service clarified that income received from abroad by an individual resident in Brazil, resulting from winnings in online betting, is subject to taxation in the form of mandatory monthly payment (carnê-leão), in the month of receipt, calculated using the monthly progressive table in force in the month of receipt (rates of up to 27.5%), with the tax to be paid by the last business day of the month following the receipt of income.
In such consultation, the Federal Revenue Service also noted that there is no legal provision for the deduction, when calculating the tax calculation base, of any losses on bets made, which adds to the criticism of the sector entities, since the compensation of losses could minimize taxation and reveal the gambler's actual income.
Within the scope of the Administrative Council of Fiscal Resources (CARF), although there is no news about judgments related to “bets”, the Council has already analyzed cases on the validity of charging Income Tax Withheld at Source (IRRF) on the value of Prize paid to winner of horse racing bet.
The last decision on the subject, published on June 19, canceled the collection of IRRF made against the Jockey Club Brasileiro, affirming the validity of Opinion CST 102/1982 – a rule that, while recognizing that there is exemption for a specific modality of bets (through “jumps”), states that taxation is due on prizes paid in the contest modality[6].
As can be seen, there are several aspects to be considered and the regulation of sports betting, although urgent, needs to be debated with due care. Apparently, there is a dispute between the Senate, the Chamber of Deputies and the Presidency of the Republic to regulate Law 13,756/2018, betting that taxation will bring a collection between R$ 12 billion (US$ 2.46b) and R$ 15 billion (US$ 3.1b). In view of this, we can only wait for the next procedures and see who will actually regulate the matter, which promises a “prize” of billions of reales for the public coffers.
LIVIA DE CARLI GERMANO
Master in Economic, Financial and Tax Law from USP, advisor to CARF and lawyer (licensed)
JULIA DE CARLI BAIÔCCO
Bachelor of Laws from UFES and lawyer at HD Advogados
Source: Jota
