The sports betting and online gaming market in Brazil is constantly expanding. The federal government is moving forward with regulation, with legalization scheduled for January 2025.
Experts and the public closely follow discussions about taxes and sector structure. Therefore, finding a balance between legalization and consumer protection is essential for the future of the market.
Revenue potential from sports betting
Last year, the Federal Government (PT) predicted revenue of R$12 billion annually from betting. However, this expectation seems optimistic. The Ministry of Finance, through the Prizes and Betting Secretariat (SPA), maintains a conservative approach.
Regis Dudena, secretary of the department, mentioned the difficulty of measuring the real size of the sector. This uncertainty impacts revenue estimates, making accurate analysis difficult. Therefore, finding reliable data remains a challenge.
Although betting sites were released in Brazil in 2018, the sector still depends on regulation. Thus, the new legislation aims to bring clarity to the market, but the lack of precise data complicates the definition of revenue estimates.
Tax rules and tax burden
The rules already outlined establish that the taxation of betting houses will be similar to other sectors. The expected rate is 12% on revenue, minus the prizes paid to bettors.
In addition, companies will be subject to taxes such as IRPJ/CSLL and PIS/Cofins. Some of the main characteristics of the tax burden are:
- Tax rate of 12% on revenue (excluding premiums).
- Taxation of profit (IRPJ/CSLL).
- Billing with PIS/Cofins.
- ISS charged by municipalities
Thus, the sum of the fees can lead to an estimated tax burden of 35%. But for bettors, there is still a 15% tax on winnings involving prizes.
However, if the text of the tax reform is approved, this burden may change. Games were included in the so-called “sin tax”. It gained this name because it aims to discourage the consumption of products that are harmful to health, such as alcohol, tobacco and which are harmful to the environment. But the government has opposed this tax.
Consumer Behavior
A Datafolha survey revealed that 15% of Brazilians have already bet online. The average monthly expenditure among bettors is R$263. Thus, between January and November 2023, spending on online betting in the form of remittances to international companies totaled R$54 billion (this value is according to an estimate by Folha with based on data from the Central Bank).
That’s why, recently, the Minister of Treasury, Fernando Haddad, started calling sports betting a “social problem”. from October 1st. The new ordinance from the Prizes and Betting Secretariat changes the deadline for legalizing bookmakers, restricting the activities of unregistered companies from October 1st.
Expectations for the regulated Brazilian sports betting market
As of August 20, 113 registrations had been accepted. After the launch of the new ordinance, other companies have already requested licenses to operate in Brazil. So, as each grant costs R$30 million, this could result in an initial collection of at least R$3.39 billion.
At the same time, the Senate is discussing the legalization of additional modalities, such as casinos and bingos. The text proposes a rate of 17% on operators’ gross revenue, in addition to taxes that could generate R$22 billion annually.
Therefore, the expectation is that the regulation will bring not only revenue, but also security for consumers who wish to participate in this growing market.
