Amendments in Conversion Bill Project that may finally help to drive the betting market fully*

On June 23 the House of Representatives concluded voting on the Conversion Bill (PLV) of Provisional Measure N. 1034/2021, whose objective is to increase the calculation base of the Social Contribution on Net Income (Contribuição Social sobre o Lucro Líquido –  CSLL) by banks, as well as the progressive escalation of the end of the exemption of the Special Regime of the Chemical Industry (REIQ), budgetary and financial counterpart to face the new expenses arising from the exemption of diesel (truckers’ agenda), thus obeying the Fiscal Responsibility Law.

Taking advantage of the situation of adjustment of tax matters in the Provisional Measure, Parliament understood the need to correct the tax base on fixed odds betting lotteries (in virtual and physical) – sports betting, that is – enabling collection of this type of tax, non-existent until then. 

Fixed Odds Betting Lottery is popularly known as sports betting and was established by Law No. 13,756 of December 12 2018 and is defined as ” a betting system relating to real sports-themed events, in which payment settlement is defined at the time of the bet, which is how much the bettor can win in case of obtaining the correct result”.

The amended Provisional Measure that addresses taxation to Gross Gaming Revenue instead of taxing gross receipts brings legal certainty to a promising and prosperous market, which awaits investments as long as there is clarity in its overall legal framework. MP 1034/2021 awaits sanction by the President of the Republic.

New Fixed Odds betting tax system will reduce illegal online betting and increase tax collection

In addition to the necessary legislative adjustments, the regulation of sports betting by the competent Ministry is still pending. Law no. 13,756/2018 established in § 2 of article 29 that the regulation of the matter would be carried out by the Ministry of Economy, a step pending until today, but with significant advances by the Secretariat of Evaluation, Planning, Energy and Lottery (SECAP) of the Special Secretariat of Finance of the Ministry of Economy.

To date, three Public Consultations on regulation have been held in Brazil, and specialists seek to align the Brazilian sports betting model to international best practices, in order to guarantee due accountability for operations and security for all parts of the business.

The last draft of sports betting regulations disclosed to the public changed the model excluding the authorization model and replacing it for the concession model, following the recommendation of the Attorney General’s Office of the National Treasury (PGFN). The model was designed so that there was the possibility of provision of penalties in the concession contract, since in the authorization model the only penalty that could be applied is that of impeachment.

Marcos Alves, founding partner at M.J. Alves e Burle Advogados e Consultores, said: “It is important to establish that there are two stages for investments in the sector to proceed satisfactorily. We emphasize the investment stages section was very well placed following the opinion of the proponent of MP 1034/2021 in the Senate, Senator Ciro Nogueira, by indicating that ‘the system of Fixed Odds betting now being proposed will reduce the size of the illegal market of online betting and increase tax collection, with more resources going to Social Security’.”

The local Investment Partnership Program website estimates that “this lottery activity (sports betting) has been exploited virtually in the country by foreign companies, moving revenues of about R$ 2 billion (US$ 406 million) per year that end up being sent out of Brazil”. There are also those who expect the new business to move revenue of about R$ 4 billion per year.

This data demonstrates how urgent it is to finalize the normative framework for fixed odds betting – in both, the amendment to the form of lottery tax collection approved by MP 1034/2021 as well as its regulation, by the Ministry of Economy.

Bárbara Teles, partner in M.J. Alves e Burle Advogados e Consultores, said: “Once ended this stage that sets out the normative framework, it will be possible to launch a new stage for sports betting in Brazil in which investments by operators and companies may take place, as well as the equivalent federal tax collection. Finally, the Law will make it feasible to tax correctly the exploitation of sports betting, unlocking such a promising market for Brazil, and this being an important first step towards the gradual opening of the full gaming market in the country as a way to expand the nation’s revenue.  Thus, this new market, with legal certainty and clear rules, will be good for everyone – including government accounts.”

*Bárbara Teles – Bárbara Teles is a partner in M.J. Alves e Burle Advogados e Consultores, member of Comissão de Direito dos Jogos da OAB-DF, and member of Instituto Brasileiro de Direito Desportivo (IBDD).