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The Joint Committee examining Brazil’s Provisional Measure (MP) 1303 voted on Tuesday (7) for the new report of Deputy Carlos Zarattini, which maintained the current 12% taxation rate levied on betting operators’ Gross Gaming Revenue (GGR), rejecting the government’s proposal to increase it to 18%. The new text does, nevertheless, incorporate a controversial retroactive taxation in the form of the Special Regime for Exchange and Tax Regularization of Betting Assets and Litigation (RERCT Zero Litigation Bets).
Under the new regime, bookmakers will be required to pay a 15% income tax rate retroactively from 2014 to 2024, in addition to a 100% penalty and a 90-day window of compliance.
The report was approved in a close vote of 13 to 12 in favor. The report maintains some of the government’s proposed rises in taxation but modifies others, such as raising taxation on financial investments. After multiple rounds of negotiations with the government’s political coalition, Zarattini decided to remove the betting tax hike but inserted the retroactive payment clause targeting operators now licensed by the Secretariat of Prizes and Betting (SPA). The proposal to increase taxation on fintechs was also removed from the MP.
In his final report, Zarattini proposed several measures to strengthen oversight of Brazil’s illicit gaming and betting market. A key provision obliges internet service providers to block unauthorized betting sites within 48 hours of notification. The objective is to stifle unlawful activity and ensure that only authorized platforms can legally operate in the country.
The retroactive taxation regime is being brought in to close possible tax disputes with betting operators and the federal state. Operators who join the RERCT Zero Litigation Bets program will be able to regularize their position by paying the 15% tax rate plus fines, and thus avoid future legal disputes on undeclared revenues or irregular tax practices from the past decade.
During the session, some of the legislators who have been opposed to legal gambling expressed dissatisfaction with the decision to strike out the clause that would have exposed regulated operators to a 50% direct tax increase. The lawmakers pushed for more taxation of the industry but were faced with arguments that over-taxation would lead to reduced government revenues while driving more punters to black markets.
Despite the retraction of the proposed tax hike, the insertion of the retroactive provision is controversial among stakeholders in the industry. Lawfully operating betting companies under the umbrella of the SPA might find themselves faced with significant financial pressures as they attempt to clear their outstanding tax invoices under the new regime.
The government continues to view MP 1303 as a core measure to rebuild public finances in 2025 and 2026, particularly after the cancellation of earlier attempts to increase the Financial Operations Tax (IOF). However, with the new retroactive tax measure, the government seeks to attain additional short-term revenue without endangering potential legislative delays.
The approved text must be voted on by the plenary sessions of the Senate and Chamber of Deputies by 11:59 p.m. on Wednesday, 8. If it fails to pass both houses of Congress by this deadline, the provisional measure will no longer be in effect, revoking all the proposed alterations and forcing the government to restart negotiations on eventual tax reforms for the financial and betting industries.
The outcome of this legislative progress will be of the utmost significance to Brazil’s legal betting market, as it will determine not only the industry’s future tax cost but also the broader compliance and enforcement landscape against unlicensed operators.
Source: GMB
