BRAZILIAN UPDATE
and known to be one of strictest in Latin America) to this new regulated market, the law set outs certain basic bettor rights, which do not include the “right-to-play”, which has caused havoc in many other countries. As required in other Brazilian regulated markets, licensed operators will have to operate a free-to-use customer assistance service, in Portuguese, and register on the Federal Government’s online complaint platform www.consumidor.gov.br.
b. For operators Law No. 14,790/2023 establishes that on the proceeds of the collection of bets after the deduction of the payment of bettor winnings and applicable IRPF, 88 percent will be applied to cover the operator´s costs and maintenance expenses. In this regard, the balance of 12 percent is to be applied over GGR. The result will be allocated and extended to certain specific public sectors and entities including education, health, sports, public safety and social security. In addition to the GGR tax, it is important to consider that Brazilian companies are subject to corporate taxation calculated according to the tax regime elected, which must consider the total expected annual turnover (annual turnover less than BRL78 million to be eligible the presumed profit regime or turnover equal to or above BRL78 million triggering the adoption of the actual profit regime). Accordingly, subject to certain restrictions (i.e. where gross income does not exceed BRL78 million and depending on the activity), Brazilian companies have the option to calculate corporate income taxes (“IRPJ/CSLL”) using a presumed profit regime (i.e. PPM - Lucro Presumido). Under the PPM, income is calculated on a quarterly basis on an amount of gross revenue (based on the entity’s activities) and adjusted as determined by the prevailing legislation. If the operator’s estimated turnover is expected to exceed BR78 million per year, it will be obliged to adopt the actual profit tax regime. In this regard, Brazilian corporate entities with an annual turnover of BRL78 million or more are subject to the following rates applicable to such actual profit regime. i. Corporate Income Tax (IRPJ) on their worldwide income annually. The basic rate is 15 percent accrued by a surtax of 10 percent on annual taxable profits exceeding BRL240,000.00. ii. Social Contribution on Net Profits (CSLL) is levied at a general rate of nine percent annually. The tax basis for IRPJ and CSLL are basically the same. Therefore, the total effective corporate tax rate is 34 percent (25 percent IRPJ [including the 10 percent surtax] plus nine percent CSLL).
4. Taxation
One of the hottest topics since the enactment of Law No. 13,756/2018 has been taxation, both for operators and bettors. While the 2018 law was amended in 2021, Law No. 14,790/2023 now finalizes the discussion in relation to the GGR 5 tax rate payable by operators, although companies in Brazil are also subject to other taxes and contributions, which increase the effective tax burden. There may, however, still be discussion in relation to the tax bettors are to pay, since President Lula, as requested by the Ministry of Finance, vetoed the first three paragraphs of article 31 of the same which addressed the topic. This veto, in addition to three others, can be reviewed by Congress within 30 days after the recess ends.
a. For bettors
The caption of article 31, which was not vetoed, establishes that net winnings are subject to personal income tax (IRPF) at the rate of 15 percent (this is half the rate paid in respect of other forms of lottery). The veto excluded the definition of “net winnings”, which was the net value of the positive result obtained from bets placed each year, after deducting losses incurred from bets of the same nature in the same period. It also excluded the IRPF exemption threshold of BRL2,112.00 per month (amounting to BRL25,344.00 per year) and the methodology under which bettors would calculate and pay IRPF (only once a year) 6 . While the veto may be overturned by Congress in 2024, there would be legal arguments to sustain bettors may still benefit from the exemption threshold, although the time period for calculating and paying IRPF over net winnings would still need to be defined, probably by a portaria .
5 Gross Gaming Revenue 6 The vetoed paragraph established that the bettor would have to calculate the taxable amount annually in his/her annual tax return by the last working day of the month following the annual date on which taxable net winnings are ascertained
PAGE 10
IMGL MAGAZINE | JANUARY 2024
Made with FlippingBook flipbook maker