Brazil's sports betting rules are expected to take effect before end of 2021

The government's economic team's idea is that betting becomes available before the World Cup, but the government itself notes that the calendar is challenging. Last Thursday, Law 14,183 was enacted, as a result of Provisional Measure 1,034.

Due to the additions made during the process, the new language changed the rules for the taxation of fixed-odds bets. The law that allows this segment in the country dates back to 2018, and has not yet been regulated. For the Secretary of Evaluation, Planning, Energy and Lottery, Gustavo Guimarães, the changes made now align Brazilian law with international law and makes this market more attractive for investors.

“It is an amendment from Congress, but it is in line with what the secretariat has been discussing. The 2018 law was very important, but in tax matters, it had been very different from the best international practices,” said the secretary. "We had been discussing with the market, with other international regulators, with potential investors," he said, "and the majority opinion indicated that the law, as it stood, was damaging the attractiveness of the business".

The Government estimates that the modality can go from BRL 2 billion (USD 385 M) to BRL 8 billion (USD 1.54 billion) per year, and generate up to BRL 700 million (USD 134.9 M) annually for the Treasury.

In 2020, Caixa lotteries raised BRL 17,100 million (USD $ 3.29 billion), a record amount, and a total of BRL 8,000 million (USD 1.54 billion) were transferred to areas such as health, education, security, and sports, in addition to income tax.

The amendment to the law changes the tax base for sports betting. Now, from the total collected, the value of the prize, the social security contribution, and the income tax will be deducted. From this balance, “legal transfers” to education, public safety, and sports entities will be calculated, as well as the resources to cover the costs of expenses and maintenance of the operator. Before, the entire calculation was made on the amount collected, as is already practiced in the most popular lottery modalities.

In Guimarães' view, the way in which these bets work justifies the new taxation method. In fixed-odds bets, there is a possibility that the operator will get a negative result. The secretariat says that given that the new format is more attractive, a substantial improvement in revenue to the Treasury is expected.