Brazil is known for being the largest country in Latin America, as well as the most populated one, with more than 207 million individuals living there. Brazil consists of 26 states, a single Federal District, and 5,570 municipalities.
In 2011, Brazil was the sixth-largest economy in the world but its GDP has dropped significantly in the following years, with Brazil currently ranking as the ninth-largest economy in the world. Some of the reasons for that include the depreciation of the real against the US dollar, as well as the economic recession that started in 2015.
In 1941, all games of chance were banned in Brazil and the only legal gambling activities in the country were the state-owned lottery and horse racing betting. Since poker is considered a game of skill rather than one depending on chance, it is legal to play.
The government predicts potential economic growth if the gambling industry is regulated and properly taxed. This is why, currently, Congress is in talks for two bills that will introduce new regulations on casinos, bingo halls, online gambling, and lotteries. Earlier this year, Deputy Eduardo Bismarck presented a new bill that was aiming to introduce several changes to the current General Tourism Law , including casino hotels in the list of tourism providers of services in Brazil.
These are not the first steps towards gambling regulation taken by the government of Brazil. In 2018, Law No. 13,756 was introduced, bringing some significant changes to the gambling scene in the country. Prior to that law, sports betting was also illegal in Brazil but since it came into effect, fixed-odds sports betting was legalized in the country. That led to several sportsbook operators welcoming punters from Brazil.
Gambling Regulation in Brazil
Ever since all games of chance were banned in Brazil in 1941, the gambling market in the country has been pretty much unregulated for more than 70 years. While bingo and slot machines were legalised in 1993, they got banned yet again in the mid-2000s. This is why the regulation of the gambling sector in Brazil is still in its early stages and most of that industry is still not regulated.
Although the word ‘game’ is present in the Civil Code of Brazil, there is no specific definition for it. Despite that scholars have provided several definitions of ‘game’ and ‘bet’ throughout the years. It can be concluded that while the result of a game depends on the actions taken by participants, the outcome of a bet is not related to the actions of the parties that are involved. Even though this difference between games and bets has not been expressed in any law, it is accepted and applied by many.
Since currently almost all forms of gambling are deemed illegal in Brazil, playing online is also not among the legal activities that Brazilians can enjoy. There is a loophole in the law, however, that allows offshore operators to welcome players from Brazil.
One of the laws that are related to contracts states that a contract is considered to have been concluded in the place where it was proposed. This is mentioned in Article 9, paragraph 2 of Decree-Law 4,657, as well as in Article 435 of the Civil Code of Brazil .
According to the aforementioned law, an offshore gaming operator who has been licensed in their respective jurisdiction can welcome Brazilian players. This way the contracts between the foreign operator and Brazilian users will be subjected to the laws of the jurisdiction where the operator is based and licensed.
Even though technically, offshore websites can welcome Brazilian customers, there might be some legal consequences for the residents of Brazil who initiate payments to these foreign operators. This being said, the Brazilian government still has not taken any actions to prevent Brazilians from gambling at offshore websites.
As already mentioned, all forms of gambling except for lotteries and horse racing are illegal in Brazil. Under Decree Law 50,954, Caixa is having a monopoly on lotteries in the country. Meanwhile, under Law 7,291 and Decree-Law 96,993, the Ministry of Agriculture, Livestock and Food Supply regulates horse racing betting.
The Ministry of Sport has defined poker as a sport and it is not regulated in Brazil. Social games or any other variation of games of skills are also not regulated. Meanwhile, the Ministry of Economy is regulating the prize distributions that are authorised either by the Secretariat or by Caixa.
Currently, Caixa has issued licenses to more than 13,000 lottery vendors. Meanwhile, there are around 200 agencies and agents that are authorised to accept bets placed on local and international horse races. As poker has also increased in popularity in Brazil, there are plenty of poker clubs to be found in the biggest cities in the country.
With the introduction of Law 13,756 in 2018, the fixed-odds betting lottery system in Brazil was created. The law defines fixed-odds betting as a system of bets on sporting events, with the prize for a winning wager being announced at the time the bet is placed. Fixed-odds betting is supposed to be regulated by the Ministry of Economics.
Taxation on Legal Gambling Activities
Under Brazilian law, prizes obtained from lotteries, horse racing bets, or prize draws are subjected to taxation. Residents of Brazil who have won monetary prizes should pay a tax of 30% the amount of the prize. Meanwhile, if the prize is paid to residents abroad, the tax should be 15% the prize amount. For residents of low-tax jurisdictions, the tax on prizes is 25%.
When Brazilian residents win prizes that are granted in the form of goods or services, they will have to pay a tax of 20%. Meanwhile, the tax for residents abroad and residents of low-tax jurisdiction is respectively 15% and 25%.
If the owner of a horse receives a prize in a turf competition, there is a tax of 15% that will be applied. If the horse is owned by a legal entity, the tax deducted from the prize amount is considered a corporate income tax. When the prize is received by Brazilian legal entities, they should also pay social contribution taxes on gross revenue and net profits.
Under Law 7,291, operators who offer horse racing betting are required to pay a monthly fee to the CCCCN. The fee is calculated on the bets taken in the previous month and it should be less than the winnings paid during the same period.
The fee rate depends on the reference value published by the CCCCN. If the revenue of bets ranges between 1 and 2,500 multiplied by RV, the operator will be exempted from paying a fee. Meanwhile, if the revenue ranges between 2,501 and 3,500 multiplied by RV, a 0.5% fee will be applied. A fee of 1% is paid by operators with revenue on bets between 3,501 and 4,000 multiplied by RV. Lastly, if the revenue on bets is over 4,001 multiplied by RV, a fee of 1.5% will be applied.