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ENV Media and NEXT.io continue their collaboration with a sensitive subject for the real-money gaming industry. The online gambling taxation framework is crucial for both players and operators and is possibly the key to providing market sustainability.

The recent regulatory updates dedicated to online gambling in Brazil introduced some distinct tax obligations for both iGaming platforms and gamblers. Understanding these details ensures compliance and enables a transparent gambling environment.

A recent in-depth case study provides the cornerstone elements of these obligations and breaks down the key taxation framework highlights.

Operator earnings tax

  • 1. iGaming operators face a 12% tax on Gross Gaming Revenue (GGR). This is an additional levy beyond other federal and local taxes.
  • 2. Operators must also pay a 15% corporate income tax (IRPJ) with a 10% surcharge on profits exceeding R$240,000 (approx. US$48,000), totalling 25% in practically all scenarios.
  • 3. Social contributions add another 9% (CSLL), while social assistance contributions (COFINS and PIS) combine for 9.25%.
  • 4. Municipal service tax (ISS) ranges from 2% to 5%, depending on the service type and municipality.

The total tax burden for most iGaming operators licensed in Brazil, therefore, comes to 55-58% on gross profits.

Player winnings tax

  • 1. Players are subjected to a flat 15% tax on their winnings, which is not combined with other personal income for annual tax calculations.
  • 2. This separation simplifies the taxation process for players and ensures a focused approach to gambling winnings.

Redistribution of tax revenue

Proper taxation was one of the main political and practical reasons for regulating the online gambling market in Brazil. In that context, tax collection is the basis for industry legitimacy.

What is more important for the wider public, however, is the way these revenues will be spent by authorities. The Ministry of Finance announced that the proceeds from the 15% tax on player winnings will support the Student Financing Fund (Fies) and the National Fund for Public Disasters.

The 12% tax on operators will be allocated across various public sectors: 10% for education, 14% for public security, 36% for sports contributions, 28% for tourism, 10% for social security funds, and 2% for health programs and NGOs.

Licensing costs

Operators will still need to pay R$30m (US$6.1m) for a five-year gambling license, which includes the rights to exploit up to three gaming brands.

Implications for the industry

The tax rates seem indeed rather steep, both in the eyes of gaming industry figures and according to the researchers’ calculations. A high tax burden (coupled with additional operational costs) poses significant challenges for licensed operators in Brazil.

To remain competitive, operators must ensure efficient compliance and leverage marketing strategies within these financial constraints. While stringent taxation aims to promote market transparency, it does little to discourage black-market operations.

Still, researchers conclude, Brazilian regulators are on the right path of providing a sustainable future for the gambling industry in the country.

ENV Media specializes in providing comprehensive research and insights on the gambling industry, helping stakeholders navigate complex regulatory environments and maximize their potential within the legal framework.

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