Brazil: President Lula sanctions law regulating sports betting and online gambling
On December 30, 2023, Brazilian President Lula da Silva signed the Law 14790, marking a significant milestone in the regulation of sports betting and online gambling in Brazil. The law was published in an extra edition of the Official Gazette of the Union, establishing a new era for the Brazilian gaming industry.
On December 30, 2023, Brazilian President Lula da Silva signed the Law 14790, marking a significant milestone in the regulation of sports betting and online gambling in Brazil. The law was published in an extra edition of the Official Gazette of the Union, establishing a new era for the Brazilian gaming industry.
The main objective of the legislation is to include online games, allowing licensed operators to offer fixed-odds bets on both real sports-themed and virtual online gaming events, as well as regulating the fixed-odds betting lottery modality, and bring structure and supervision by implementing measures to prevent fraud and result manipulation.
The final version of the legislation remains largely consistent with the provisions outlined in Bill 3626/2023, however; some of the most notable changes are Articles 53, 55, 56, and Annex I, as well as three paragraphs of Article 31 concerning player’s taxation on winnings now being vetoed by President Lula.
What is now vetoed
The first veto on the new legislation consists of three out of the four bullet points of article 31, which go over the player’s taxation on winnings. Originally, Article 31 defined the concept of net winnings, suggested tax exemption for prizes falling below the initial Personal Income Tax (IRPF) bracket, and proposed calculations of income tax to be set annually.
This constitutes the most significant veto of the legislation, as the original article allowed the non-taxation of gains below $435 USD, an amount equivalent to the Income Tax exemption bracket.
It’s also important to note that with the veto of paragraph 3 of Article 31 in place, in which the annual calculations of the income tax is effectively scratched off, the frequency of tax collections remains unclear. This matter will be pending for now, and it is the responsibility of the Federal Revenue to determine the new periods of tax collections.
“The maintenance of §§1 and 3 of Article 31 of the proposed law would lead to an income tax burden distinct from that observed in other lottery modalities, creating a differentiation in tax conduct without a motivating reason for such. Moreover, the retention of §2 of Article 31 of the proposed law would also run counter to tax equality, as per Article 150, II, of the Federal Constitution, since it would introduce a logic of tax exemption inconsistent with the ordinary rules governing the receipt of prizes from lotteries in general, as established by Article 56 of Law No. 11,941, 2008.”
- Justification from President Lula Da Silva published in an extra edition of the Official Gazette.
Additionally, bettors’ net winnings will remain taxed by the Personal Income Tax (IRPF) at the rate of 15%.
The remaining vetoed articles concerned the following matters:
● Article 55 of the previous legislation originally went over the documentation processes for submitting complaints and conducting investigations, as well as the documentation for accountability processes involving the free distribution of prizes and draws of up to R$ 10,000.00 (ten thousand reais).
● Article 56 of the previous legislation stated the applied Income tax on prizes obtained in capitalization titles in the philanthropic award modality only applying to an exceeding cash prize value
● Article 53 and Annex I contained the authorization fees for prize amounts.
“If Articles 53 and Annex I of the Bill were to be maintained, there would be no set authorization fee for prize distributions up to R$ 10,000.00 (ten thousand Brazilian reais).”
The other key aspects of Law 14790
● Foreign operators can receive authorization, but must have established headquarters within the country.
● The authorization fee is up to R$ 30 million (thirty million Brazilian reais, or EUR 5,592,000), applicable to up to three commercial brands (URLs) for a period of up to five years.
● The Ministry of Finance’s authorization will specify whether each operator can conduct both virtual and physical betting operations, or only one of these.
● Online games will be limited to digital platforms, with no availability in physical environments.
● The operator must have a Brazilian entity or person as a shareholder holding at least 20% of the legal entity’s share capital.
● A taxation rate of 12% on Gross Gaming Revenue (GGR) for operators. Operators might be subject to other corporate taxations.
● In order to receive authorization, operators must submit a letter describing their intention at least 30 days in advance and pay the authorization fee.
● Every applicant must adhere to the relevant advertising rules, including the prohibition of offering bonuses for promotional purposes, and follow the established control policies such as customer service, anti-terrorism security mechanisms, and preventing result manipulation.
● Monthly inspection fee based on the Operator’s net revenue (ranging from EUR 10,143 to EUR 362,361.
What’s next for operators?
For now, interested operators must keep an eye open for further provisions from the Ministry of Finance, such as the pending taxation periods. Once the legal documents are published, online casino and sports betting operators will have a 180-day window to submit their license applications following the proper requisites.
The final version of the legislation remains largely consistent with the provisions outlined in Bill 3626/2023, however; some of the most notable changes are Articles 53, 55, 56, and Annex I, as well as three paragraphs of Article 31 concerning player’s taxation on winnings now being vetoed by President Lula.
What is now vetoed
The first veto on the new legislation consists of three out of the four bullet points of article 31, which go over the player’s taxation on winnings. Originally, Article 31 defined the concept of net winnings, suggested tax exemption for prizes falling below the initial Personal Income Tax (IRPF) bracket, and proposed calculations of income tax to be set annually.
This constitutes the most significant veto of the legislation, as the original article allowed the non-taxation of gains below $435 USD, an amount equivalent to the Income Tax exemption bracket.
It’s also important to note that with the veto of paragraph 3 of Article 31 in place, in which the annual calculations of the income tax is effectively scratched off, the frequency of tax collections remains unclear. This matter will be pending for now, and it is the responsibility of the Federal Revenue to determine the new periods of tax collections.
“The maintenance of §§1 and 3 of Article 31 of the proposed law would lead to an income tax burden distinct from that observed in other lottery modalities, creating a differentiation in tax conduct without a motivating reason for such. Moreover, the retention of §2 of Article 31 of the proposed law would also run counter to tax equality, as per Article 150, II, of the Federal Constitution, since it would introduce a logic of tax exemption inconsistent with the ordinary rules governing the receipt of prizes from lotteries in general, as established by Article 56 of Law No. 11,941, 2008.”
- Justification from President Lula Da Silva published in an extra edition of the Official Gazette.
Additionally, bettors’ net winnings will remain taxed by the Personal Income Tax (IRPF) at the rate of 15%.
The remaining vetoed articles concerned the following matters:
● Article 55 of the previous legislation originally went over the documentation processes for submitting complaints and conducting investigations, as well as the documentation for accountability processes involving the free distribution of prizes and draws of up to R$ 10,000.00 (ten thousand reais).
● Article 56 of the previous legislation stated the applied Income tax on prizes obtained in capitalization titles in the philanthropic award modality only applying to an exceeding cash prize value
● Article 53 and Annex I contained the authorization fees for prize amounts.
“If Articles 53 and Annex I of the Bill were to be maintained, there would be no set authorization fee for prize distributions up to R$ 10,000.00 (ten thousand Brazilian reais).”
The other key aspects of Law 14790
● Foreign operators can receive authorization, but must have established headquarters within the country.
● The authorization fee is up to R$ 30 million (thirty million Brazilian reais, or EUR 5,592,000), applicable to up to three commercial brands (URLs) for a period of up to five years.
● The Ministry of Finance’s authorization will specify whether each operator can conduct both virtual and physical betting operations, or only one of these.
● Online games will be limited to digital platforms, with no availability in physical environments.
● The operator must have a Brazilian entity or person as a shareholder holding at least 20% of the legal entity’s share capital.
● A taxation rate of 12% on Gross Gaming Revenue (GGR) for operators. Operators might be subject to other corporate taxations.
● In order to receive authorization, operators must submit a letter describing their intention at least 30 days in advance and pay the authorization fee.
● Every applicant must adhere to the relevant advertising rules, including the prohibition of offering bonuses for promotional purposes, and follow the established control policies such as customer service, anti-terrorism security mechanisms, and preventing result manipulation.
● Monthly inspection fee based on the Operator’s net revenue (ranging from EUR 10,143 to EUR 362,361.
What’s next for operators?
For now, interested operators must keep an eye open for further provisions from the Ministry of Finance, such as the pending taxation periods. Once the legal documents are published, online casino and sports betting operators will have a 180-day window to submit their license applications following the proper requisites.
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Obviously, in case you would have any questions or require additional clarifications to the above, we would be happy to speak with you!
Contacts us on sayhi@4h.agency or via Telegram
