The exemption range of $433 for prizes paid to gamblers persists and remains valid, even after the presidential veto to § 2 of article 31 of Law 14,790/23. Surprised? Well, that's the plain truth. Let us explain why.
At the end of 2023, specifically on December 29, the President of the Republic sanctioned Law 14,790/23, but with vetoes, one of which removed the exemption range provided in § 2 of article 31.
Article 31, in its heading, established a 15% income tax rate on net prizes obtained from fixed-odds betting lotteries and, in the mentioned paragraph, stated that "the tax [...] will apply to net prizes exceeding the value of the first range of the annual progressive table of Personal Income Tax - IRPF."
However, at this point, Law 14,790/23 did not innovate the legal order. This is because Article 56 of Law 11,941/09 had long provided that "income tax on prizes obtained in lotteries (genus) will only apply to the cash prize that exceeds the value of the first range of the monthly incidence table of Individual Income Tax - IRPF."
What is observed, in truth, is that there has been a general rule on the taxation of lottery prizes since 2009. Fixed-odds bets, according to Article 29 of Law 13,756/18 and Article 1 of Law 14,790/23, are classified as a kind of lottery. Thus, if there is a rule governing the taxation of lottery prizes (genus), it applies to fixed-odds betting lottery prizes (species). The general rule will only not apply to fixed-odds bets if there is a specific law on the matter, according to Article 2, § 2, of the Law of Introduction to the Norms of Brazilian Law.
In this case, the specific law that aimed to regulate the taxation of fixed-odds lottery prizes was Law 14,790/23, which ended up having its initiative blocked by the presidential veto. Therefore, without the existence of a special norm of the same legal hierarchy governing the taxation of prizes, the guidelines provided in the general rule, that is, in Law 11,941/09, are now applied, guaranteeing the exemption for net winnings obtained by the gambler up to R$2,112.98.
Due to the preexistence of Article 56 of Law 11,941/09, Law 14,790 would not even need to address the issue. It did so to reinforce the application of the exemption range. Since the provision was vetoed, nothing changes.
In addition to vetoing the veto to § 2 of Article 31 of Law 14,790/23, the President of the Republic also chose to veto §§ 1 and 3 of the provision. Paragraph 1 brought a definition of what the net prize mentioned in the heading would be. The proposal was for the net prize to be interpreted as "the positive result obtained in fixed-odds bets made each year, after deducting losses incurred with bets of the same nature.
"The veto prevents the net gain from being calculated "each year," but it cannot change the concept of net profit, after all, as provided for in Article 110 of the National Tax Code, "tax law cannot change the definition, content, and scope of institutes, concepts, and forms of private law." Thus, in practical terms, if the presidential veto is not overturned, the calculation mechanics applicable to gambler prizes will result from a simple algebraic operation.
Received Prize (P) - Bet Amount (V) = Net Gain (G)
For every positive G, that is, if there is the aforementioned "profit," and this G is greater than the current US$433, there will be an incidence of IRPF at the rate of 15%, which must be definitively withheld by the operator. Otherwise (negative G or G below US$433), the prize must be exempt from IRPF.
In other words, IRPF can only effectively apply to what increased the gambler's assets (above the exemption range), subtracting the bet amount. This interpretation is also consistent with the provisions of Article 14 of Law 4,506/64, which, when dealing with the taxation of lottery prizes, indicates the profit as the basis for calculation, which is nothing more than the positive result resulting from the subtraction of revenue obtained with an activity from the expenses incurred with it.
Finally, paragraph 3 of Article 31, which was vetoed, reinforced what was provided in paragraph 1 of the same provision (also vetoed), by stating that IRPF would be calculated annually. The removal of these predictions from the final text of Law 14,790/23 ends up making the calculation of net gain occur per bet, with no possibility of offsetting losses and gains determined within the same sporting event or in a certain period, as the rule authorizing this practice ended up being vetoed, and there is no general rule governing this matter.
In summary, we understand that the rule guaranteeing IRPF exemption for gambler gains below US$433 still applies. Gains subject to the incidence of IRPF at a rate of 15% will be net gains, that is, amounts exceeding the limit of R$2,112.98 after deducting the bet amount, and if the presidential veto is not rejected by the National Congress, the tax will be calculated per bet, in accordance with the wording of Law No. 14,790/23, and the guidance provided in Law No. 11,941/09. Going against these conclusions will represent an affront to legislation that deals with lotteries and may cause a tax imbalance.
Waldir Marques
Former CEO – CAIXA Loterias S.A.
Former Deputy Secretary for Lottery, Prizes, and Draws Regulation at the Ministry of Finance
Rafael Marchetti Marcondes
Lawyer and Ph.D. in Law from PUC/SP
MBA in Sports Betting from Ohio University/USA
MBA in Sports Management from ISDE Barcelona/ES
Chief Legal Officer at Rei do Pitaco, Lawyer
