The Senate Plenary approved this Thursday the tax reform project on consumption, which will now be sent for further analysis by the Chamber of Deputies after undergoing changes. The text includes an amendment that mandates the application of the Selective Tax on sports betting. Operator associations have already warned that this could make the regulation of iGaming in Brazil ineffective.
The amendment presented by Senator Alessandro Vieira (MDB-SE), vice-president of the CPI of Bets, and accepted by Eduardo Braga, aims to ensure that sports betting and online games are clearly included in the taxation, combating tax evasion and increasing revenue.
The rapporteur's opinion provided that the Tax on Goods and Services (IBS) and the Contribution on Goods and Services (CBS) would apply to prediction contests, both in physical and virtual environments, including lotteries, fixed quota betting, and sweepstakes.
However, it made a generic mention of prediction contests in the case of the Selective Tax, which could lead to divergent interpretations, and Vieira's amendment eliminates this gap.
The National Association of Games and Lotteries (ANJL) has already expressed concern about the possibility of implementing a "Selective Tax" (or "sin tax") for the sports betting and online gaming market in the process of regulating the Tax Reform. For them, the measure could render the entire regulation process of the sector ineffective, as it tends to encourage the illegal market.
Law 14.790/2023, which regulated this market, set a tax rate of 12% on Gross Gaming Revenue (GGR, i.e., the difference between the total volume of bets and the value of the prizes paid) after intense lobbying by the sector with the National Congress.
Last year, the ANJL demonstrated to congressmen, through studies and data, that a heavy tax burden (the original proposal was 18%) would only drive away serious betting houses that wish to operate in the country in a regulated manner, and at the same time, would cause illegal sites to proliferate even more in the country.
International examples show that, the heavier the tax burden, the less channeling by authorized sites and, therefore, the greater the irregular ones.
Considering the new taxes (IBS and CBS) foreseen in the Tax Reform, the tax burden of the sector in Brazil should exceed 35%, one of the highest in the world. This without considering the multimillion-dollar payment of grants to the Union – and, depending on the decision of the operators, to the states and the Federal District – and the incidence of 15% Income Tax on the net prizes of the bettors.
Chapter IV of the reform approved by the Senate is dedicated to lottery modalities, including sports betting, online games, and fantasy sports:
CHAPTER IV: OF THE PREDICTION CONTESTS
Section I
General Provisions
Art. 237. Prediction contests, in physical or virtual medium, including all lottery modalities, fixed quota betting, and sweepstakes, horse racing bets, and other bets, are subject to a specific regime of incidence of IBS and CBS, according to the provisions of this Chapter.
Sole paragraph. The provisions of this Chapter apply to fantasy sport.
Art. 238. The calculation base of IBS and CBS on prediction contests is the own revenue of the entity resulting from this activity, corresponding to the product of the collection, with the deduction of:
- paid prizes; and
II - mandatory allocations by law to a public body or fund and other beneficiaries.
Art. 239. The rates of IBS and CBS on prediction contests are nationally uniform and correspond to the sum of the reference rates of the federal entities.
Art. 240. The credit of IBS and CBS to the bettors of the prediction contests is prohibited.
Art. 241. The prizes paid are not subject to the incidence of IBS and CBS.
Art. 242. The company operating prediction contests must present an accessory obligation, in the form of the regulation, containing, at a minimum, information about the place where the bet is made and the values of the bets and the prizes paid.
Sole paragraph. If the bets are made virtually, in the accessory obligation referred to in the head of this article, the bettor must be identified.
Section II
Of the Importation of Prediction Contest Services
Art. 243. Entities domiciled abroad that provide, through virtual means, prediction contest services as referred to in this Chapter to bettors residing or domiciled in the country shall be subject to the incidence of IBS and CBS by the same rate provided for prediction contests in the country.
§ 1 The service provider referred to in the head of this article is the taxpayer of IBS and CBS, and the bettor may be jointly responsible for the payment in the cases provided for in art. 21 of this Complementary Law.
§ 2 The calculation base is the revenue earned by the entity due to the operation, with the application of a reduction factor provided in the regulation, calculated based on the deductions from the calculation base of the prediction contest services in the country.
§ 3 The provisions of Chapter IV of Title I of this Book apply to the imports referred to in this Section, insofar as they do not conflict with the provisions of this article.
Section III
Of the Export of Prediction Contest Services
Art. 244. The prediction contest services provided, through virtual means, to residents or domiciled abroad shall be considered exported, being immune to the incidence of IBS and CBS, for the purposes of the provisions of Chapter V of Title I of this Book.
§ 1 The regulation will provide for the form of proof of residence or domicile abroad for the purposes of the provisions of the head of this article.
§ 2 Services of prediction contests provided in the presence, on the national territory, of a resident or domiciled abroad are not considered exported.
Source: GMB
