SBC News Brazil CAE settles on tax and fiscal duties of federal sports betting market  

Brazil CAE settles on tax and fiscal duties of federal sports betting market  

The Economic Affairs Commission (CAE) of the Senate of Brazil has concluded its review of the tax and fiscal modalities of Bill 3,626/23 – submitted by the government to regulate a federal fixed-odds betting market. 

The review marks the final assessment of Bill 3,626/23 by a legislative advisory, as the Senate will forward the Bill to the Plenary of the Superior Electoral Court to be voted into federal law – expected to take place on 28 November.

Examined by the CAE, the Bill’s evaluation was conducted by Senator Angelo Coronel, reviewing amendments submitted by succeeding Commissions evaluating modalities.

Final changes saw the CAE revise the tax framework endorsed by Finance Minister Fernando Haddad. Brazil’s federal market will apply a 12% tax on licensed operators and 15% tax on player prizes, lowering the 18% operator and 30% prize tax recommended by the Ministry of Finance.

The decision sees the CAE side with the amendments proposed by former rapporteur Adolfo Viana of the PSDB Party – who in September proposed measures to lower income taxes and include ‘online gaming events and esports within the Bill’s framework – opposed by the PT government. 

During its final reading, the Bill faced opposition from senators Eduardo Girão and Carlos Portinho who demanded that online gaming events be removed from the text,  a proposal ignored by the CAE.

The change will require the Ministry of Finance to revise its market projections of generating BRL 700m (€130m) in taxed income per year. CAE stated that the lowering of taxes was required to “attract consumers and businesses to a new federal market”.

On player prizes, operators must register customer winnings through the Personal Income Tax (IRPF) registry, which will be charged on a yearly basis with exemptions below winnings of BRL 2,112 (€400). Consumers have 90 days to claim prizes, with unclaimed winnings to be allocated to educational and disaster relief funds.

The tax rate of 12% charged on licensed operators will include deduction of customer winnings and the taxes paid on player prizes.

The CAE approved the Ministry of Finance’s licensing framework that will charge BRL 30m (€5.5m) to acquire a federal licence which will be valid for five years and allows operators to service three brands.

Operating duties will require licensed operators to have a domiciled business in Brazil, paying regional income taxes. Furthermore, licensed operators must have a Brazilian partner holding 20% of share capital in the domiciled business. 

The CAE’s review settled long-standing fiscal policies related to the allocation of tax revenues. Following a revision, the CAE has settled on the tax income distribution of

10% allocated to the Ministry of Education; and 14% to public security, including the National Public Security Fund and Sisfron.

Brazil’s Ministry of Sports will receive a combined 36% of income to be shared across sports organisations, national bodies and related charities.   

28% will go to the tourism sector, directed to the agencies of Embratur and the Ministry of Tourism; 1% to the Ministry of Health; 0.5% to civil society agencies of Fenapes and Fena Pestalozzi; and 0.5% to the Federal Police’s operational fund.

CAE agreed that sector oversight must fall under the remit of the Ministry of Finance that will establish penalties for market violations, infringements, misconduct and criminality. 

Market activities and licensed operators will be monitored by a new supervisory agency, established by the government and reporting to the Ministry of Finance.  

Though securing Bill 3,626/23 final approval, CAE did not conduct a review on advertising rules and standards, as modalities are yet to be defined by the PT government and CONAR  – Brazil’s Advertising Council.

Forwarding the Bill’s procession to the Electoral Court, CAE advised legislators to examine further proposals related to restricting brand limits, implementing facial recognition for customer identification, and revising ‘tax on net winnings’ following the market’s implementation.

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