According to Filipe Senna, partner at Jantalia Advogados and an expert in Gaming and Betting Law, taxation was defined by law and became one of the government's main objectives with the sector's regulation. However, proper enforcement could only take place once the Ministry of Finance published the full set of regulations.
"With the regulated sector, the collection of taxes on winnings has become mandatory, ensuring the widely publicized increase in federal government revenue. This means that winnings from betting must be reported in the Income Tax return, in accordance with current regulations," he explains.
However, there are tax exemption thresholds that benefit some bettors. According to the legislation, winnings up to R$ 2,259.20 (US$395) are exempt from Income Tax, following the updated withholding tax table. Amounts exceeding this limit are taxed at a 15% rate on the net winnings from each individual bet, with the tax already deducted at the time of withdrawal by the betting operator.
"The tax is withheld directly by the authorized betting house operating in Brazil, which simplifies the bettor’s tax compliance," adds the lawyer.
Another key point is that, even though the tax is withheld at the source, winnings must still be reported in the taxpayer's annual income tax return. "The Federal Revenue Service requires that all taxable income, even when tax has already been collected, be declared in the IR. This prevents tax inconsistencies and potential audits," warns Senna.
Additionally, bettors should stay alert to possible changes in taxation and updates to the rules. With the sector's regulation still evolving, new guidelines may be established by the federal government.
"The betting market is a reality and is undergoing consolidation in Brazil, especially since January of this year. Adjustments in legislation may occur. The important thing is for bettors to stay informed about the rules, keep their tax situation in order, and retain betting statements from the platforms they use," he points out.
Given these requirements, the lawyer suggests seeking advice from an accountant, which is essential to avoid mistakes in filing the Income Tax return. "Bettors need to understand that, now, the activity is regulated, under government oversight and monitoring. This means more attention is required for tax compliance. Properly completing the tax return avoids future issues and ensures compliance with the law," he concludes.
Income tax on betting: How does it work?
In addition to the taxation of winnings paid to bettors, betting operators must also pay corporate taxes. With the regulation of the sector, authorized betting companies in Brazil are subject to the Gross Revenue Contribution (a tax on revenue) and Corporate Income Tax (IRPJ), as well as social contributions like PIS and Cofins.
Furthermore, companies in the sector must comply with additional obligations, such as accounting records and filing tax returns with the Federal Revenue Service. Failure to correctly pay taxes may result in sanctions or even the loss of authorization to operate in Brazil. Therefore, proper tax classification and strategic tax planning are essential to ensure compliance and financial viability for betting operators in the country.
Source: GMB
