Brazil Sports Betting Tax Changes

• Following the move to legalize sports betting, Brazil has seen a slew of sportsbooks enter the market and offer their services.
• New proposals slated to be featured in a provisional measure seek to tax sportsbooks at 15%, but concerns over additional taxes may threaten sportsbook operators.

BRASILIA – With Brazil entering itself firmly into the global gambling market after sportsbook regulation, the country is looking to maximize its income. The government is aiming to increase the tax rate on sportsbook operators, keeping in line with the United Kingdom model that has performed admirably.

However, there is worry among operators that the tax increase could reach obscene levels if they are levied in addition to the standard taxes. It is clear now that the legal sports betting industry in South America’s largest country has taken off in a big way and is undergoing numerous developments.

Tax Proposal Raises Concerns Among Operators

Following the historic legalization that occurred earlier last month, Brazil is now looking for a way to regulate the market. President Luiz Inácio Lula da Silva is expected to issue a provisional measure that will raise the tax rate on gross gaming revenue of operators to 15%, citing the UK’s successful system that reached 90% compliance.

The provisional measure is set to hold a similar weight as ordinary federal law, but will only remain in place if Congress converts it into a true federal law in the four months following its decree. However, operators have raised alarms about this prospect, mainly because it has not been confirmed if the 15% tax rate is in addition to standard taxes like the municipal service tax.

If confirmed, the total tax rate for operators would reach a staggering 26.25%, a number that major players in the industry have been staunchly against. Many of the operators are in favor of the 15% rate though, as it would help in the process of establishing a regulated market.

For individuals, sports betting winnings that amount to over BRL 2,640 ($530.54 USD) would be taxed at a 30% income tax rate. However, this is not expected to impact around 90% of Brazilians who gamble recreationally and would be exempt from this tax.

LOTEX Return Re-Establishes Scratchard Lotteries

In other major news, Brazil is looking at bringing back LOTEX, a scratchcard lottery that was last active in 2020 but failed after the Supreme Court disallowed the Federal Union’s monopoly on lottery operation and a contract could not be reached with the replacement operating companies.

The return of the lottery would allow Brazil’s government to collect about BRL 5 billion, equaling 986.88 million USD. Before being dissolved a few years ago, the lottery was the second largest in the world by earnings, according to Caixa Econômica Federal, the previous operator of the lottery.

Caixa is now being floated as once again being the operator of LOTEX, which may be temporary but has not been confirmed by authorities.

In total, the growth in Brazil legal sports betting has been outstanding in the small time it has been federally recognized. With clearly many more developments soon to come, it will be an interesting case study for the future of Brazil’s revenues, regulations, and legislative outcomes.

News tags: Brazil | Caixa Econômica Federal | Lotex | Luiz Inácio Lula da Silva | United Kingdom