Brazil has taken a significant step towards formalizing its burgeoning betting market by establishing a clear tax framework for player prizes and winnings. The Federal Revenue Service (RFB) has officially announced its stance on personal income tax (IRPF) for “net prizes” obtained through betting, lotteries, and online gambling.
Key Tax Provisions
The new tax policy stipulates a 15% personal income tax on prizes and winnings exceeding BRL 2824 (approximately €530). This threshold is set to avoid taxing smaller winnings, which equate to about two average monthly wages for Brazilian consumers. Winnings below BRL 2824 will not incur the 15% tax, ensuring that casual bettors and small-time winners are not overly burdened.
For bettors, net prizes will be calculated as the difference between the prize won and the total amount wagered. This means that the 15% tax will be applied at the source when the winnings are credited to the customer’s account, similar to the practices of state lotteries. This framework, approved by RFB General Secretary Robinson Sakiyama Barreirinhas, will require amendments to Brazil’s federal tax laws concerning the Income Tax on Individuals (IRPF) and the Declaration of Income Tax Withheld at Source (DIRF).
Addressing Controversy and Industry Concerns
The introduction of taxes on player prizes has been a hotly debated topic leading up to the launch of Brazil’s sports betting market. The measure was solidified following President Lula da Silva’s endorsement of Bill No. 3,626/2023, which laid out the legislative groundwork for federal sports betting and online gambling in Brazil. The tax provisions of this bill required RFB review to ensure integration into the national tax regime.
The National Association of Games and Lotteries (ANJL) had previously urged the government to reduce the tax burden on players, arguing that high taxes could drive players to unregulated and clandestine gambling markets. ANJL’s concerns were echoed by the Brazilian Institute of Responsible Gaming (IBJR), which criticized the tax model as potentially harmful to both consumers and the nascent regulated betting market.
Regulatory and Operational Details
In preparation for the sports betting market launch, the PT government has proposed a 12% tax rate on gambling income and a BRL 30 million (approximately €5.5 million) fee for federal licenses, valid for five years. The Secretariat of Betting and Prizes (SPA) is tasked with finalizing the technical ordinances necessary for the market’s operation, including regulations on payments, IT security, crime prevention, and responsible gambling.
Recent SPA ordinances have focused on IT security and stringent rules for data management, requiring that all IT-related data be stored within Brazil and accessible to the Ministry of the Economy and Finance. The SPA is expected to release further ordinances on crime prevention and responsible gambling by the end of July, aligning with the government’s timeline to launch the betting market in 2024.
Moving Forward
Brazil’s formalized tax framework for player prizes and winnings marks a pivotal development in the country’s betting market. By implementing clear tax regulations and addressing industry concerns, Brazil aims to foster a sustainable and competitive environment for both operators and consumers. As the market prepares for its official launch, the continued focus on regulatory compliance and responsible gambling will be crucial in shaping a successful and well-regulated betting industry in Brazil.
