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Brazil – States could entice operators with lower tax rates

By - 19 February 2024

While the Federal Government has yet to finalize regulations for the online betting market, Rio de Janeiro and Paraná are attempting to take pre-emptive measures by adopting initiatives aimed at increasing revenue and attracting betting companies to their states.

According to Globo these measures include setting values for licensing fees and applying revenue percentages lower than those stipulated in federal legislation.

The Ministry of Finance has urged governors to wait for the final details of the federal law to be published as The Federal Government fears a potential clash among different states as they seek to attract bettors and generate revenue for state coffers.

By March, at least three new regulations will be published. Their objective will be to establish guidelines for audit companies, advertising, and opening registrations for betting houses interested in obtaining a license. Speaking during the special panel on Brazil during the ICE VOX conference in London earlier this month, Special Advisor to the Ministry of Finance José Francisco Manssur said that that the government was expected to move forward with the enactment of at least 12 ordinances to regulate online gambling.

One of the issues facing the federal government is the granting of state licenses. While a national license allows a company to operate throughout the country, a local license restricts operation to the registered state. Territorial delineation control will be achieved through georeferencing.

Therefore, the granting of state licenses may have their own regulations, such as lower licensing fees and winnings taxes compared to national standards, as well as specific rules for advertising locally.

Under federal law, an online betting company deciding to operate in the country will have to pay R$30 million to obtain an operating license. The approved bill imposes 12% revenue tax for online betting companies.

The president of the National Association of Games and Lotteries, Wesley Cardia, told Globo, “States can have lotteries, but what they cannot do is legislate national rules. In other words, federal law always takes precedence.”

“They cannot, for example, create a rule that allows authorization of companies outside the state. A state lottery must be sold exclusively within the state’s territory.”

In September 2020, the Supreme Court of Brazil (STF) ruled that the federal government’s lottery monopoly was unconstitutional, paving the way for states to develop state lotteries for each of Brazil’s 26 states and one federal district as long as they complied with federal regulations. Sports betting was categorized as “sports lotteries’ in 2018 via Law No. 13,756 which was signed by then President of Brazil, Michel Temer in 2018. It legalised sports betting on a federal level although regulations weren’t put in place over the industry until now. The STF decision meant that states could begin to roll out their own lottery products within their own state borders including sports betting.

The Rio de Janeiro State Lottery – (Loterj)  become the first company authorized to operate online sports betting in Brazil.  In June 2023 according to the lottery of the state of Paraná (Lottopar) the news that it would launch sports betting has led to a significant amount of interest in terms of visitors to its site. The government published public notice No. 001/23 for the accreditation of lottery operators to operate sports betting in the state in May last year.

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