Brazilian govt. publishes measure regulating sports betting with a 18% tax on GGR

After years of delays, sports betting is now legal in Brazil. The Brazilian Government has published a Provisional Measure (MP) regulating the activity with an 18% tax on company revenues. The tax will be levied on Gross Gaming Revenue (GGR), which is the revenue generated from all games after the payment of prizes to players and income tax (IR) on the prize pool.

The MP has now been signed into law by President Luiz Inácio Lula da Silva. The National Congress now has 120 days to approve the MP, which was unilaterally issued by the government. However, the Congress may move to block the measure.

The Ministry of Finance will be responsible for granting licences to companies and defining the value of the license through the establishment of the National Secretariat for Games and Betting (SNJA). The MP amends Federal Law No. 13,756, reports BNL Data.

Published in 2018, the Federal Law regulates the operation of fixed odds lotteries, also known as sports betting. The new MP marks the largest step forward in the journey to legal sports betting since the 2018 law passed the Senate, with the last five years marked by delays, match-fixing scandals and missed deadlines.

Previously, the law provided that this modality was an exclusive public service of the Government. The word "exclusive" has now been removed from the text. It will now be up to the Ministry of Finance to authorize the operation of these bets, "with no limit on the number of grants, with the possibility of commercialization through all commercial distribution channels, physical and virtual."

Taxation up to 18%

The measure stipulates that the companies will be taxed at 18% on the gross gaming revenue, leaving 82% of the revenue for the brands to maintain their operations. The taxes are distributed as follows:

• 10% for social security;
• 0.82% for basic education;
• 2.55% to the National Public Security Fund;
• 1.63% to clubs and sportsmen and women who have their names and symbols in connection with bets;
• 3% to the Ministry of Sport.

In May, the Ministry of Finance published a proposal for a 16% levy. In the new MP, the government increased the transfer to the Ministry of Sport from 1% to 3%, which raised the overall tax to 18%.

Under Law 13,756/2018, taxation was up to 5% on company revenues after payment of prizes, income tax on prizes and social security contributions (which had a rate of 0.10% for physical means and 0.05% for virtual bets).

Betting prohibitions

The provisional measure stipulates that the following persons are prohibited from taking part in sports betting:

• Public bodies involved in the supervision of the sector at the federal level;
• Persons under the age of 18;
• Persons with access to computerised fixed odds lottery systems;
• Persons who can influence the outcome of matches, such as coaches, referees and athletes;
• Persons registered in national credit registers.

In the case of public inspectors, persons with access to betting systems and persons who can influence the outcome of matches, the ban also extends to spouses, partners and relatives up to the second degree, as per the cited source.

Other key rules

Prizes that are not claimed by the winners within 90 days will be returned to the Student Financing (Fies) fund until July 2028. After that date, the funds will go to the National Treasury.

Partners and shareholders of sports betting companies will not be able to act as managers or participate in sports organizations. The companies will also have to report to the Ministry of Finance any incidents where they suspect results have been fixed.

The MP also requires betting companies to promote awareness actions for bettors about gambling addiction. It will be up to the Ministry of Finance to regulate marketing activities. The MP includes a clause allowing foreign operators to apply for a license, a provision that was more ambiguous in the original regulations.

Betting companies are prohibited from acquiring, licensing or financing the acquisition of rights to sporting events held in Brazil for the purpose of broadcasting, distributing or otherwise presenting sound and images by any means.

Fines and penalizations

Companies that operate betting without a license from the Ministry of Finance, or operate with a license but offer the service in contravention of the law, may be penalized.

Fines can range from 0.1% to 20% of the company's turnover, with a maximum of R$2 billion ($423.3 million) per offense. The operating license may also be revoked and the company's activities suspended.

Access Provisional Measure No. 1,182 here