The Brazilian Congressional Joint Committee recently approved a retrospective taxation bill for licensed gambling operators, requiring back taxes on gambling operations since 2014, while simultaneously scrapping the original plan to raise the gambling tax rate to 18% of total revenue. The bill passed by a narrow margin of 13 to 12 and is expected to generate about 5 billion reais (560 million USD) in revenue for the government. The new bill also includes measures against illegal operators, requiring internet service providers to suspend illegal gambling content within 48 hours. The retrospective taxation plan adopts a voluntary participation principle, allowing operators to declare historical assets within 90 days, with a tax rate of 15% plus a 15% penalty, making the actual total tax burden 30%.
Bill Passage and Core Content
The Brazilian Congressional Joint Committee passed a significant bill imposing retrospective taxation on licensed gambling operators, covering gambling operations from 2014 to the present. The initial proposal to raise the gambling tax rate to 18% of total revenue was removed from the bill before the vote.
The bill was passed by a narrow margin of 13 to 12 and is now submitted to both houses of Congress for a second round of voting, with the final result to be determined this Wednesday.
Tax Adjustment and Expected Revenue
The original proposal planned to increase the gambling tax rate by 50%, reaching 18% of total revenue, but was removed from the bill before the vote. The government expects to raise about 5 billion reais (560 million USD) through the retrospective taxation plan, equivalent to three years of revenue if the tax rate had been raised to 18%.
This adjustment means that operators will continue to pay the 12% total revenue gambling tax rate implemented before the temporary measures in June.
Retrospective Taxation Mechanism and Requirements
The bill establishes a special regime for foreign exchange and tax asset supervision (RERCT Litígio Zero Bets), imposing a 15% tax rate on gambling activities from 2014 to 2024, with an additional 15% penalty, making the actual total tax burden 30%.
Participation in the program is voluntary, and licensed operators have 90 days from the publication of the text to join by voluntarily declaring assets.
Measures Against Illegal Operators
In addition to the tax proposal, the bill also contains measures against illegal operators. According to the revised regulations, internet service providers must suspend content marked as illegal gambling within 48 working hours.
This measure aims to strengthen market regulation, protect the interests of legal operators, and reduce illegal gambling activities.
Expert Interpretation and Industry Impact
Brazilian iGaming expert Elvis Lourenço explains that operators need to pay a 15% income tax on the value of any online gambling assets owned from 2014 to December 31, 2024, and face additional penalties for operating in the gray market.
Law firm Bichara e Motta Advogados' Udo Seckelmann states that voluntary participation provides legal certainty for operators, avoiding long-term tax disputes with the government.
Operator Participation Motivation and Considerations
Although participation is voluntary, experts believe joining the plan can provide legal certainty for the future of Brazilian gambling operators, help avoid long-term tax disputes, and demonstrate sincerity to regulatory authorities.
Seckelmann notes, "Voluntary participation may limit future liabilities and stabilize relations with authorities." However, he also acknowledges that many operators may question the fairness of retrospective taxation.
Constitutional Controversy and Legal Challenges
Lourenço warns that operators who believe retrospective taxation is unconstitutional may opt for legal challenges rather than joining the plan. The proposal still requires political negotiation and may be approved, further amended, or completely invalidated.
Seckelmann adds, "Retrospective taxation could undermine legal certainty and investor confidence, thereby hindering compliance and future investments."
Market Reaction and Industry Views
While the cancellation of the tax increase is beneficial for operators, those who operated before regulation may feel uneasy about declaring historical assets. Seckelmann suggests that the proposal may cause concern among those who entered the market under clearly defined tax expectations.
Lourenço believes these revisions bring "greater clarity and predictability" to the Brazilian market, positively developing regulatory stability.
Future Outlook and Implementation Prospects
If the bill text is not approved by the Senate and House of Representatives before the end of Wednesday, the bill will expire, and operators will revert to paying a 12% total revenue gambling tax rate.
Seckelmann suggests that if the bill passes, the industry should actively participate in public discussions to ensure fair implementation of the measures and analyze their financial impact.
