Brazil: Te Challenges
Under the new regulatory framework, licensed operators must withhold a 15 per cent tax on player winnings that exceed R$2,824. Operators are also required to pay a 12 per cent tax on gross gaming revenue (GGR) with additional federal and local taxes bringing the total tax burden to approximately 25 per cent and pay R$30m for a licence.
TAXATION Under the new regulatory framework, licensed operators must withhold a 15 per cent tax on player winnings that exceed R$2,824. Operators are also required to pay a 12 per cent tax on gross gaming revenue (GGR) with additional federal and local taxes bringing the total tax burden to approximately 25 per cent and pay R$30m for a licence. Although the cost of licences is steep and the overall tax rate is high compared to some jurisdictions the current outlook suggests that a liberalised market will be established in Brazil, resulting in a high rate of onshore channelling according to a report published by the International Betting Integrity Association. However additional taxes could well be on the horizon. In
July the working group on the regulation of tax reform in the Chamber of Deputies made changes to a “sin tax” already on the table and included new categories of products and services. According to the opinion of the deputies, electric cars and sports betting, fantasy games and lotteries would be subject to the tax charged on items that harm health or the environment. Te sin tax on the industry was approved by Congress in December and President Luiz Inacio Lula da Silva officially signed the Brazilian tax reform in January. However, the exact rate of the tax on gambling and when it will be applied have yet to be confirmed.
LICENSING In addition, there are some questions over just how smooth the licensing process will be from now on. Operators have understandably been keen to get on board. In January when Brazil finally launched its regulated online market the list of companies authorised for sports betting and online games included 15 definitive licenses, valid until December 31, 2029, and 66 provisional licences, giving companies 30 days to address identified issues. In total, 136 brands were approved. Te companies on the initial list are those that submitted their applications by August 20, 2024. Applications made after this date are under review and, according to current regulations,
must be processed within 150 days from the initial documentation submission. A number of operators have appealed the SPA’s rulings. So
far, the SPA has been compelled to authorise the operation of seven companies and 19 brands due to federal court decisions. Te way gambling has been regulated in Brazil has led to varying interpretations, including concerns regarding the appropriateness of the companies involved and the absence of transparent criteria for denying authorisations. More cases are likely to follow as operators question the decisions handed down by the newly established gambling board.
CORRUPTION In addition, worrying reports have begun to emerge regarding the licensing process. In December Senator Izalci Lucas drew attention to information published in Brazilian newspaper O Estado de S. Paulo that claimed that beneficiaries of social welfare programmes such as Bolsa Família had appeared as owners of online gambling companies. According to the article, foreign groups had used Brazilians as “front men” to open ghost companies. “Te Ministry of Finance, which should be the guardian of
the authorisation process for these companies, seems more concerned with counting the R$30m collected for each subsidy than with ensuring the suitability of the applicants. Te delay in the analysis of applications creates a perfect window of opportunity for fraudsters to operate with impunity,” he said. Te Senator said that it will be necessary to move towards
some kind of reform or regulatory modification that leads to tightening controls. “It is time to demand a structural reform that prioritizes ethics, transparency and social justice, before the collapse is irreversible,” he said. According to Estadão, of 183 applications for registration of
online gambling platforms submitted to the Betting Management System of the Ministry of Finance 33 were registered by people who provided their data in exchange for payments or whose names were used irregularly. Tose who
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