It is not necessary to create suspense and leave the answer to the above question at the end of this text. It's simple: we don't know.
Since in December 2018 a law was passed (No. 13,756) to set the conditions for the complete legalization of sports betting, but dependent on future administrative regulations, we patiently await a Federal Government decree that will establish the premises for interested companies operate legally in Brazil.
The matter, which was 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 BNDES' orbit, when it was included in the Investment Partnership Program (PPI). Since then, although a public call for prospecting interested parties in helping 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 the so-called “gray” operations, which are those where foreign operators offer bets to the Brazilian market via websites hosted on foreign servers. Due to the Federal Government's leniency, what is “gray” begins to turn “white”. And it is worth remembering that the gray market does not pay taxes in Brazil.
Although the horizon for publication of the long-awaited decree remains uncertain, at least good news has been given to the future legalized sports betting market: when companies are licensed in Brazil and pay their taxes in the country, the calculation basis will no longer be made on the total revenue, but following the GGR premises.
This change took place through 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.
If before, the law established that, of the proceeds from the collection of bets, a minimum of 80% should be allocated to the payment of prizes and the tax levied on the prize when bets were made by physical means, and when made by virtual means at least 89% should be allocated to the payment of prizes and the applicable tax, now, correctly, the unreasonable imposition of minimum payout by law is ended, leaving this definition to the free market.
The new law changes the format of taxation, stating that the tax calculation basis will be found after deducting the value of the award, the income tax on the award, social contributions, and also the percentage of 5% that includes destinations for football clubs, educational programs and FNSP.
By doing this, Brazil is in line with the best tax practices in the sector, favoring the legalization of the market and making the proliferation of the black market a little more difficult, as there are proven examples around the world that very high taxation can make prizes few attractive, causing a portion of the bets to go to the black market, which offers a higher prize just for not paying taxes.
Now that this relevant fiscal issue has been resolved, we hope that the BNDES, whose competence is undeniable, will speed up its procedures as the country is losing a lot of money with the delay in the concession process.
Lawyer, partner at Carlezzo Advogados, specialist in sports law and author of the book ‘Direito Desportivo Empresarial’