The sports betting market in Brazil is undergoing an unprecedented regulatory transformation. The implementation of the Tax Reform, along with the provisional measure regulating the so-called “sin tax” or Selective Tax, will structurally redesign the tax burden on operators operating in the country.
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Rodrigo Orair, director of the Executive Secretariat of the Ministry of Finance, confirmed this scenario in an interview granted to the newspaper Folha de S. Paulo.
What is the Selective Tax and why does it affect betting
The Selective Tax was conceived as a levy intended to discourage the consumption of products considered harmful to public health and the environment. Among the affected categories are tobacco, alcoholic and sugary beverages, polluting vehicles, and, importantly for the gaming industry, online betting.
According to Orair, the draft of the Complementary Bill (PLP) No. 68/2024 is already finalized regarding the general rules of the tax. However, the specific rates have not yet been defined by the government.
How betting taxation changes from 2027
Currently, betting operators in Brazil are taxed under the PIS/Cofins scheme and the Service Tax (ISS). With the entry into force of the new system, scheduled for 2027, this scheme will be replaced by the two major consumption taxes created by the Tax Reform:
The Tax on Goods and Services (IBS), under state and municipal jurisdiction, and the Contribution on Goods and Services (CBS), under federal jurisdiction, which will replace PIS, Cofins, and the Tax on Financial Operations (IOF) applied to insurance.
Both taxes will be applied at full rate on betting activity, representing a substantial change from the current scheme.
The social allocation rises from 12% to 15%
Beyond the new consumption taxes, the betting market will continue to be subject to the so-called “social allocation,” a percentage of revenues that operators must allocate to public funds established by law. According to Orair, this rate would increase from the current 12% to 15%, representing an additional increase in the sector’s tax burden.
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To this charge will be added the obligation to pay the Selective Tax, creating a more demanding tax scheme than the current one.
A model designed jointly with the Secretariat of Prizes and Betting
Orair highlighted that the new tax scheme was not developed unilaterally by the Ministry of Finance, but in coordination with the Secretariat of Prizes and Betting (SPA), the sector’s regulatory body. The declared objective is to find a balance between the different collection instruments, without compromising the viability of the regulated market that Brazil has been building since 2023.
This collaborative approach seeks to prevent excessive tax pressure from encouraging the migration of operators and players to unregulated platforms, a latent risk in markets undergoing formalization processes.
The revenue cap as a compensation mechanism
One of the most relevant technical aspects pointed out by the official is the existence of a constitutional cap on the collection of the new taxes. In practice, this means that if the Selective Tax generates more revenue than expected, the CBS rate must be proportionally reduced so as not to exceed the established limit.
This compensation mechanism has concrete implications for betting: higher revenue performance from the Selective Tax on the sector could result in less pressure from the CBS on other goods and services in the economy.
An expanding market facing greater tax demands
Brazil consolidated in 2024 one of the most dynamic sports betting markets in Latin America, with a transactional volume estimated in tens of billions of dollars annually. The formalization of the sector brought new obligations for operators but also created a framework of predictability that various international actors positively valued when applying for licenses.
The entry into force of the new tax scheme in 2027 adds a significant variable to the financial projections of companies operating in the country, especially those that have already adjusted their business models under the previous scheme.
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