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Brazil – Lula’s veto could drive players to unregulated market

By - 12 February 2024

The National Association of Games and Lotteries (ANJL) has warned that charging Income Tax at source on net prizes paid to winners of sports betting and online games has the potential to attract bettors to illegal websites.

Taxation on winnings must be considered by the National Congress, upon return from the parliamentary recess, when President Luiz Inácio Lula da Silva’s vetoes on Brazil’s online gambling law are voted on.

Talking to Brazilian newspaper Correio, the ANJL argued that if the vetoes on the sections that provide for annual tax collection are kept in place then the government could lose out on significant tax revenue.

ANJL advocates that the 15% Income Tax rate on winners’ prizes be collected through the declaration made annually by the taxpayer.

“In this way, annual taxation would bring a double benefit to the country, preventing bettors from fleeing to illegal betting sites and possible legal questions about withholding tax, which could compromise the Union’s own revenue target from the sector,” said the president of the association, Wesley Cardia.

The original bill provided that prizes up to BRL 2,112 (the limit of the lowest Personal Income Tax bracket) would be exempt from taxation but this was vetoed.

The change was made so that the Federal Government would not promote “Income Tax taxation different from that applied in other lottery modalities, thus establishing a tax distinction without plausible justification.”

President Luiz Inácio Lula da Silva sanctioned online sports betting and casino games on December 30. The measure was published in an extra edition of the Official Gazette of the Union. As well as vetoing the tax exemption on player bettors’ winnings President Lula also vetoed proposed standards for the authorization of commercial promotion and the filing of complaints, investigations and accountability related to the distribution of prizes and draws of up to R$10,000.

In January The Brazilian Institute of Responsible Gaming (IBJR) welcomed the signing of the country’s new online bill. It too expressed concerns over the way players could be taxed on winnings. 

“However, the IBJR is concerned about the lack of definition of the basis and method of calculating the Income Tax levied on premiums paid to the end customer. As the consumer is the reason for the existence of the entire sector, this definition needs to happen quickly and rationally. The Institute is now available to build a sustainable model for this issue in conjunction with the responsible bodies. Bad customer experience, both in relation to excessive taxation and as a result of a complex verification system, tends to push consumers towards the informal market in the short term,” the IBJR said.

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