When will the sports betting market finally be legalized in Brazil?

By Eduardo Carlezzo*.

*Lawyer, managing partner of the law firm Carlezzo Advogados, based in Sao Paulo, football law specialist and author of the book Corporate Sports Law (2004). @carlezzo.advogados

 It is not necessary to create suspense and leave for the end of this article the answer to the above question. It's simple: you don't know.

Since December 2018 when the law n. 13.756 established the initial steps for the full legalization of sports betting, but dependent on future administrative regulations, we patiently expect a decree from the Federal Government that will set the premises for interested companies to legally operate in Brazil.

The issue, initially in the hands of the Ministry of Economy, which repeatedly promised that the regulation was about to come out, passed, in June 2020, to the orbit of BNDES (Brazilian Development Bank) when it was inserted in the Investment Partnerships Program (PPI). Since then, even though a public call for prospecting interested parties in assisting the bank in modeling the concession process has been made, nothing relevant has occurred.

And so, due to the lack of regulation, the Brazilian sports betting market is indefinitely “legalizing” operations called as "gray", which are those where foreign operators offer bets to the Brazilian market via websites hosted on foreign servers. By the leniency of the Federal Government, what is "gray" begins to turn into "white". And it is never too much to remember that the gray market does not pay taxes in Brazil.

Although the horizon for the publication of the long-awaited decree remains uncertain, for tax purposes at least good news has been given to the future legalized sports betting market: when companies are finally licensed in Brazil and pay their taxes in the country, the calculation basis will no longer be made on turnover, but rather following the standards of the GGR.

This change occurred through the Law n. 14.183 of July 14, 2021, which changed the previous law (Law 13.756/2018) and brought greater rationality to the distribution of prizes and calculation of taxes.

Based on the terms of the revoked parts of the Law 13.756/2018, a minimum of 80% of the income generated by the bets should be allocated for the payment of prizes and the withholding income tax on the prize when bets were made by physical means, and, when made on-line, at least 89% should be allocated to the payment of prizes and its withholding income tax. Now, correctly, the new law ends with the misplaced imposition of minimum payout, leaving this definition to the free market.

The new law changes the format of taxation, by informing that the basis for the calculation of taxes will be found after deducting the amount of the prize, the income tax charged on the prize, social contributions, and also the percentage of 5% that includes allocations to football clubs, educational programs and public security fund. 

In doing so, Brazil is in line with the best tax practices of the sector, favoring the legalization of the market and making it a little more difficult to the black market, since there are proven examples around the world that very high taxation can make prizes unattractive, bringing bets to the black market, which offers higher rewards precisely for not paying taxes.

Now, once this relevant tax issue is resolved, we hope that BNDES, whose competence is undeniable, accelerates its procedures because the country is unnecessarily losing a lot of money with the delay of the concession process.


Todos os Direitos Reservados | 2020
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