Brazilian Senate approves fixed-odds sports betting bill
Approved version of Bill No. 3,626/2023 will now return to the House of Representatives for further review
On December 12, 2023, Brazil’s Senate approved a new version of Bill No. 3,626/2023, which seeks to amend Law No. 13,756/2018 to regulate fixed-odds betting. The bill also proposes amendments to existing legislation on commercial promotions.
The Brazilian government originally submitted the bill to the House of Representatives shortly after it issued Executive Order No. 1,182 in July 2023 to supplement sports betting regulations in the country. The House of Representatives approved the bill on September 13, 2023, and the Senate has also now approved it, albeit with certain changes. In the meantime, Executive Order No. 1,182 expired on November 21, 2023.
The main changes that the Senate proposed and approved in regard to the original text encompass:
- Online casinos and virtual game betting: despite the expectations of the Brazilian government, the new version of the bill does not permit companies to run online casinos or betting on virtual games;
- Authorization period: the maximum term of each authorization for sports betting in Brazil has been extended from three to five years;
- Use of brands: online sports betting operators may make use of up to three commercial brands per authorization (the original text provided for only one brand per authorization);
- Local ownership: the new version of the bill requires a Brazilian shareholder to hold at least 20% of the shares of sports betting companies;
- Taxation of sports betting companies: the new version of the bill reduces the tax rate for betting companies, who will now pay 12% on gross gaming revenue. These companies will also be subject to the corporate taxation in Brazil (IRPJ/CSLL/PIS/COFINS/ISS);
- Adaptation period: the Brazilian Ministry of Finance will establish conditions and (minimum six-month) deadlines for existing betting companies to adapt to the provisions of the law and the specific regulations that stem from it;
- Ministry of Finance notifications for improper advertising: the new version of the bill reiterates advertising companies (including internet application providers) are obliged to remove irregular campaigns after being notified by the Ministry of Finance. The bill now also states that once they are notified, internet application providers hosting third-party applications must take down those offering unauthorized bets, whenever this is technically possible. The Ministry’s notifications must clearly identify the infringing content so that providers may locate it;
- Bettor identification: betting companies must implement procedures to validate bettors’ identities, with the use of facial recognition/identification technology to be required;
- Taxation of bettors: net prizes will be subject to an income tax (IRPF) rate of 15% (the bill originally provided for 30%). The ‘net prize’ is defined as a positive financial outcome stemming from fixed-odds sports betting over the course of each year (after deducting losses incurred with bets of the same nature). The tax will only apply to values exceeding the lowest IRPF tax bracket (BRL 2,112.00). IRPF on net prizes must be calculated annually and paid by the last business day of the month immediately following the calculation. This rule also applies to fantasy sports;
- Fees: Fixed-odds sports betting will be subject to a monthly supervision fee, which will be levied on betting companies’ revenue after deductions. The value may range from BRL 54,419.56 to BRL 1,944,000.00, depending on the amount of revenue;
- Conflicts of interest: partners or shareholders of sports betting companies may not hold a direct or indirect stake in a Football Corporation (Sociedade Anônima do Futebol), sporting organization, or financial or payment institution that processes bet-related revenues;
- Fantasy sports: The bill specifically defines ‘fantasy sports’ and establishes that it does not fall within the scope of fixed-odds sports betting – thus, it does not require authorization. The new version of the bill proposes increasing the Social Contribution Tax on Net Profit (CSLL) rate from 9% to 12% for fantasy sports companies.
Given the Brazilian Senate has approved these changes, the bill will now return to the House of Representatives for further review. If approved in the House, the bill will be sent to the President’s Office, who may either sign the bill into law or veto it.
For more information on this topic, please contact Mattos Filho’s Entertainment practice.
*With the collaboration of Natan Jamil Angelo.