Last week, an article was published reporting the testimony of the Secretary of the Federal Revenue, Robinson Barreirinhas, before the Parliamentary Inquiry Commission (CPI) on Bets, which is investigating the situation of sports betting and online gaming companies in Brazil.
The CPI on Bets aims to investigate possible irregularities, fraud, tax evasion, and money laundering involving these activities. Barreirinhas stated that he intends to "retroactively collect taxes from 2019 from companies that have regularized themselves with the Secretariat of Prizes and Betting (SPA), the agency responsible for granting licenses and overseeing fixed-odds betting operations in the country."
To begin, it is important to provide context on the activity of sports betting in Brazil. In 2018, Law No. 13,756/18 was enacted, regulating fixed-odds betting in Brazil. However, its implementation was ineffective, as it depended on regulations that were supposed to be issued by the Ministry of Finance¹. These regulations were not issued within the expected timeframe, making this first attempt to regulate the sector unsuccessful. Only in 2023 was Law No. 14,790/23 enacted, establishing new guidelines for regulating the subject. As of now, the Brazilian fixed-odds betting market is still in the process of regulation.
It is clear that the lack of tax collection from sports betting companies resulted from the inability to regulate this sector for more than five years. Therefore, it would be inconsistent to demand taxation from sports betting companies for the period before 2025 as if they were Brazilian legal entities, considering that a Brazilian legal entity was legally prohibited from operating betting activities in the country. Due to the lack of specific legislation regulating online sports betting in Brazil, companies operating in the Brazilian market had to base their operations abroad.
According to the Brazilian legal system, it is not possible to levy taxes without a law establishing them. Currently, there is no legal basis to impose taxes on an entity located abroad. Furthermore, tax law must adhere to the principles of anteriority, non-retroactivity, legality, contributive capacity, and equality, among others.
In this regard, the Federal Revenue would not be legally capable of demanding that companies regularized in 2025 pay taxes on income earned in the previous five years, as there was no law providing for such taxation, no defined tax rate, and no adequate tax base. Additionally, this taxation would violate the principles of non-retroactivity and legal certainty, which prevent the application of tax laws to events that occurred before their enactment and ensure predictability and stability in legal relations. Such taxation would also impact foreign investors' confidence, potentially discouraging them from entering or remaining in the Brazilian sports betting market.
Precisely due to this legal impossibility of taxing entities located abroad, the threat has been directed only at companies that have complied with Brazilian legislation, established their operations in the country, and paid grants of over R$30 million for that purpose. Therefore, we are threatening to punish precisely the companies that trusted the Brazilian legal system, invested in our country, and in the future of this industry in Brazil.
Instead of attempting to collect taxes in an improper and abusive manner, creating legal maneuvers to tax what was clearly not taxable, the tax authorities should focus on fostering a favorable, secure, and transparent environment to promote and properly tax companies from 2025 onward. This approach would encourage competition, innovation, consumer protection, and job creation, as well as generate revenue for the country.
[1] It is worth noting that Article 29, §3 of the aforementioned law stated that "The Ministry of Finance shall regulate the provisions of this article within a period of up to 2 (two) years, extendable for an equal period, from the date of publication of this Law."
Lisa Worcman
Tax lawyer and partner at Mattos Filho law firm, specializing in consulting for companies in the technology and entertainment industries. She is a sponsor of Attix, the firm's innovation initiative. She works in tax consulting, transfer pricing, application of international treaties, cross-border transactions, and structuring foreign companies' businesses in Brazil. In the technology field, she has extensive knowledge in intellectual property, copyright, video-on-demand regulation, streaming, music, advertising, sports betting, and sports law. She holds a Law degree from Universidade Presbiteriana Mackenzie, an MBA in Economic and Financial Management from FGV-SP, a specialization in Tax Law from PUC-SP, and an extension in Entertainment Law from New York University.
