Brazil has solidified its tax framework concerning player prizes and winnings within its burgeoning betting market. The Federal Revenue Service (RFB) of Brazil has officially outlined its stance on personal income tax (IRPF) applicable to “net prizes” acquired through betting, lotteries, and online gambling.
In line with expectations, the RFB has endorsed the government’s decision to implement a 15% personal income tax on prizes and winnings exceeding BRL 2824 (approximately €530). Notably, the 15% tax levy will not be imposed on net winnings or prizes below BRL 2824, a threshold deemed as equivalent to two average monthly wages for Brazilian consumers.
For the Bets market, net prizes will be computed as the disparity between the prize amount won and the total sum wagered by the customer. Operators will apply the 15% tax charge ‘at source’ upon crediting customer winnings, mirroring the practices observed in state lotteries. The framework, authorized by RFB General Secretary Robinson Sakiyama Barreirinhas, will necessitate amendments to Brazil’s federal tax legislation concerning the Income Tax on Individuals (IRPF) and the Declaration of Income Tax Withheld at Source (DIRF).
A Contentious Issue
The imposition of taxes on player prizes has been a contentious issue in the lead-up to the sports betting market launch. This measure was introduced following President Lula da Silva’s endorsement of Bill No. 3,626/2023, which provided the legislative framework for Brazil’s entry into the federal sports betting and online gambling arena. As a federal law, the tax provisions of Bill No. 3,626/2023 required RFB review for integration into the broader tax regime.
The National Association of Games and Lotteries (ANJL) urged the government to alleviate the “tax burden on players” before the Bets launch. ANJL advocated for congressional intervention, citing previous revisions to gambling tax rates applied to businesses, reduced from 18% to 12%, as essential for safeguarding market competition and integrity among licensed operators.
According to SBCNews, ANJL previously cautioned the PT government “that international experiences show that taxing users encourages clandestine gambling.” That is why they called to “adjust the details to ensure the sustainable development of this promising sector.” The Brazilian Institute of Responsible Gaming (IBJR) also criticized the government’s decision and described the adopted tax model as “not only legally questionable but also harmful to the consumer and the incipient regulated Brazilian betting market.”
Presently, the PT government plans to launch the sports betting market with a 12% tax rate on gambling income and a BRL 30m (approximately €5.5m) fee for federal licenses valid over a five-year term. The remaining procedural tasks for the sports betting market launch fall under the purview of the Secretariat of Betting and Prizes (SPA), which is responsible for finalizing technical ordinances pertaining to payments, IT security, crime prevention, and responsible gambling protocols. Among the regulations issued by the SPA, the ban on credit card payments and the requirement for Banco Central do Brazil (BACEN) authorization for all customer deposits and withdrawals stand out.
Recent developments include the issuance of an SPA ordinance on IT security and the implementation of stringent rules on data management. Operators must ensure that IT-related data is stored within Brazil and accessible to the Ministry of the Economy and Finance. The SPA aims to release remaining ordinances on crime prevention and responsible gambling by the end of July, aligning with the PT government’s commitment to launching the Bets market in 2024.