The Special Secretary of the Brazilian Federal Revenue (RFB), Robin Barreirinhas, warned that taxing gambling companies that are active within Brazil but headquartered abroad could be challenging.
During a meeting of the Brazilian Parliamentary Commission on Fake Ball Investigations (CPI) held on Wednesday (September 4), requested by Senator Carlos Portinho, Barreirinhas made these remarks. He highlighted the challenges of providing services across borders and the different tax regulations in various countries.
Barreirinhas stated, "The whole world is discussing how to deal with the increasingly intense provision of services and exchange of goods in a virtual environment."
Foreign operators are allowed to enter Brazil's licensed gambling market, which will start on January 1, 2025. A study by the Rio de Janeiro law firm Veirano Advogados reported that at least 40 of the first 114 applications came from foreign operators.
To mitigate uncertainties, Normative Instruction No. 827 stipulates that international companies must have the support of a local entity, which must hold at least 20% of the Brazilian shares. The entity's headquarters must be in Brazil and registered in Brazil.
Barreirinhas told the committee that this rule will ensure that local entities are accountable to their international partners and can maintain open discussions with the RBF.
"This is why the model approved by Congress mandates that companies are obliged to have a legal representative here, to facilitate such dialogues.
"We are following the global coordination actions among tax authorities to cooperate in exchanging information related to financial transactions, so that we can enforce the law."
Licensed operators will pay taxes at 12% of the Gross Gaming Revenue (GGR) and are required to pay an initial licensing fee of BRL 30 million (4 million pounds/4.8 million euros/5.5 million dollars). A joint certificate from the RFB Special Secretariat and the Attorney General's Office will ensure that companies are registered and taxed locally.
"Our focus is on taxing companies, not players."
Normative Instruction No. 2,191, issued in May, stipulates that a 15% tax is levied on player winnings exceeding 2,824 Brazilian reais (500 dollars).
Players will be taxed before receiving their winnings, and gambling operators will be responsible for calculating and collecting the tax.
The Brazilian Responsible Gambling Association (IBJR) previously stated that this tax framework is "harmful" to players and "legally questionable," but Barreirinhas expects that the Brazilian Football Confederation will "gain almost nothing" from the tax on player winnings. He noted that few players win enough money to reach the tax threshold.
"We must focus on the companies," Barreirinhas explained. "The companies are the winners, the profit-makers."
Tax evasion is a major concern for the Senate
Senator Portinho expressed concerns about tax evasion, especially involving payment companies that avoid exchange fees by keeping funds in Brazil.
Barreirinhas noted that this issue is not exclusive to online gambling, as the Central Bank of Brazil and the Central Bank of Russia are already working to mitigate these activities.
"It's not necessarily illegal, but if there are companies in Brazil receiving and making payments, they must pay taxes," Barreirinhas added. "This often also violates foreign exchange laws."
