Last week, on July 16th, 2021, the Official Gazette of Brazil published Law No. 14,183 to officially enact new changes on how the country taxes sports betting. President Jair Bolsonaro signed the new law to modify Chapter 30 of Law No. 13,756 (passed in 2018), which initially applied a 3% tax on sports betting turnover. With the newly gazetted law, the state will instead be imposing a tax on gross gaming revenue (GGR).
So, now, the tax base will be calculated after winnings have been paid out, and then the state will tax what remains after social security payments had been made. According to the new taxation regulation, the funds raised will be directed to “guarantee the functioning and to improve the physical and pedagogical infrastructure of educational establishments.”
While the law was still under consideration as a legislative bill, lawmakers also argued that the changes would improve how sports betting was regulated. Following the amendments, tax collected from retail and internet-based entities would now go for bonuses.
How Proceeds from Brazil’s New Sports Betting Taxation Will Be Divvied
Based on the sports betting taxation law that’s just been gazetted, 95% of the tax proceeds shall be channeled to cover the operational and maintenance costs of fixed-quote lottery operators. After that, a 2.55% share of the collected tax will be directed to the National Public Security Fund (FNSP), whereas another 1.63% will be set aside for sports clubs.
Under the new regulations, sports clubs are defined as “Brazilian sports entities that grant their rights to use their names, brands, emblems, anthems, symbols and more to promote and execute fixed odd bets.” Finally, 0.82% of the collected funds shall be allocated to support schools that perform excellently in national examinations.
Back in June, when the bill was okayed by Brazil’s legislative unit dubbed the Chamber of Deputies, Federal Deputy Moses Rodrigues, the rapporteur of the original bill welcomed the new amendments saying:
“The amendments to the aforementioned legislation will allow progress towards the establishment of the lottery modality of fixed-odd betting and to have the appropriate collection for the Union…. Experience in Europe shows that it is better to adopt the operator’s gross profit as a basis, providing stable flows of public revenue and prizes and making bettors use the services of local operators.”
Furthermore, the new law has also introduced a measure to control the financial movement of lottery vendors who pay out prizes in the form of cash or real estate. This will be supervised by banks and other associated financial institutions, which shall then submit a report to the Financial Intelligence Unit (FIU) of the Central Bank.
The Race for Sports Betting Regulation in Brazil Continues
Currently, Brazil is in the process of drawing up a plan to launch a regulated sports betting market. However, the debut of a legal sports betting market continues to face delays because of the changes that keep being introduced along the way. Rather than conventional licensing, the country has switched to a concession model.
Last month, Brazil’s second most populous city, Rio De Janeiro, started the process of incorporating new gambling products under the umbrella of Loteria do Estado do Rio de Janeiro’s (Loterj). The organization called on interested operators from the sports betting and lottery gaming verticals to begin the application process for a tender. Loterj is searching for companies that have the capacity to offer sports betting and lottery services both in-person and online.
In August 2020, President Bolsonaro formally authorized the privatization of sports betting after adding the gaming vertical to the country’s agenda. He signed a decree that added sports betting to the country’s portfolio for the Investment Partnership Program (PPI) and national privatization programs. During this time, the president also appointed managers to spearhead the licensing process.