Brazil: Federal Revenue Secretariat opposes presidential veto and maintains income tax exemption for sports bets

Brazil's Special Secretariat of Federal Revenues of the Ministry of Finance unveiled on Tuesday the Normative Instruction RFB no. 2.191. Published in the Federal Official Gazette, the instruction goes against President Lula's veto of Law 14.790/23 on the maximum exemption limit for bettors' winnings in sports betting and online games.

The provision can be read at this link.

The rule allows the exemption corresponding to the 1st bracket of the monthly income tax table in force since February - up to the limit of BRL 2,259.20 (about $444) - contrary to the understanding of the federal government.

Signed by the Secretary of Federal Revenue, Robinson Sakiyama Barreirinhas, Normative Instruction 2,191 amends art. 11 of Normative Instruction RFB 1,500/2014, which deals with income tax exemption, including:

"IX - prizes obtained in lotteries, including fixed odds bets referred to in art. 31 of Law No. 14,790, of December 29, 2023, up to the limit of the value of the 1st (first) bracket of the monthly income tax incidence table," states the text of the regulation.

President Lula vetoed Article 31 of Law 14.790/23

Presidential veto

In December 2023, when enacting the law, President Lula vetoed the section that provided for a tax exemption for players with winnings below the first income tax bracket (IRPF).

As a result, winnings of any value would be taxed at 15%, a situation that drew criticism from the industry. In the opinion of many, this would encourage players to flee to the illegal market, where there would be no taxation. 

In Law 14,790/23, it had been established that the tax would be paid annually with an exemption up to the limit of the 1st band. Lula vetoed the exemption and the form of annual collection.

With the new rule, bettors who win up to BRL 2,259.20 will be exempt, but the income tax will be paid at source, when the prize is credited, at a rate of 15%

The regulation has confused businessmen and analysts of the sector, who are now waiting for new statements and definitions from the Federal Government to understand how the exemption and taxation work. 

The National Congress meets in a joint session this Thursday, May 9, to debate the presidential vetoes pending analysis, including the vetoes to Article 31 of Law 14.790/2023, when everything can be defined.