Brazil tax

Brazil has introduced the tax framework applied to player prizes and winnings for the well-awaited launch of its Bets market. 

Earlier this week, the Federal Revenue Service (RFB) of Brazil confirmed its ruling on personal income tax (IRPF) that will be applied to ‘net prizes’ obtained via betting, lotteries and online gambling.

The RFB approved the government’s modality to impose a 15 per cent personal income tax on prizes and winnings above BRL 2824 (around €530).

For net winnings/prizes below BRL 2824, the RFB will exempt the 15 per cent tax charge. The figure is reported to be equivalent to two average monthly wages for Brazilian consumers.

Net prizes of the Bets market will be determined as the difference between the prize amount won and the total amount wagered by the customer.

Replicating the same mechanisms as state lotteries, the 15 per cent tax charge will be applied ‘at source’ by operators when crediting customer winnings. 

The framework will apply changes to Brazil’s federal tax laws on the Income Tax on Individuals (IRPF) and the Declaration of Income Tax Withheld at Source (DIRF), having gained authorisation from RFB General Secretary Robinson Sakiyama Barreirinhas.

The tax charge applied to player prizes has been viewed as a point of conflict in the pending launch of the Bets market.

The measure was imposed by President Lula da Silva upon signing Bill No. 3,626/2023 into law, authorising the legislative framework for Brazil to launch its federal sports betting and online gambling marketplace.

Sanctioned as a federal law, the tax plan of Bill No. 3,626/2023 required a review from the RFB to be incorporated within the government’s general tax framework.

Brazil’s National Association of Games and Lotteries, ANJL, pleaded with the government to reduce the “tax burden on players” ahead of the market launch.

The trade body lobbied for an intervention by Congress, who previously revised the gambling tax rates applied to businesses from 18 per cent to 12 per cent. This move was viewed as necessary to protect the market’s competition and integrity for licensed operators.

As reported by SBCNoticias, the ANJL previously warned 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.’”

Following the recent developments, the PT government will launch the Bets market, imposing a 12 per cent tax rate on gambling income and a BRL 30m (circe €5.5m) fee for federal licences valid for a five-year period.

Remaining procedures to launch the Bets market will be led by the Secretariat of Betting and Prizes. The organisation is tasked with finalising technical ordinances on payments, IT security, crime prevention and safer gambling duties.

The Brazilian government recently laid out ‘Normative Ordinances’ for the upcoming market launch, revealing that operator-led bonuses and free bet incentives will be banned.