SOFTSWISS: Brazil raises bets in gambling game
Carla Dualib, regional business development manager at SOFTSWISS talks about the Brazilian market.
Opinion.- The excitement around the Brazilian gambling market has been simmering for many months. However, before it can truly become a golden opportunity, the Brazilian gambling landscape has to overcome challenges posed by complex tax regulation as Carla Dualib, regional business development manager at SOFTSWISS, highlights in the following article.
A borderline tax burden
The Brazilian government has imposed a substantial tax bundle on igaming operators. A 12 per cent tax on gross gaming revenue (GGR) is just the beginning. Add to that corporate income tax (15 per cent), social contributions (9 per cent), and municipal service taxes, and the overall tax rate can easily exceed 50 per cent.
And let’s not forget the cost for a five-year gambling licence – BRL30m (USD5.9m) – which operators will have to pay for the right to use up to three gaming brands. These fees create a significant barrier for businesses looking to enter the market.
Despite the significant financial barriers imposed by the licensing fees, more than 100 businesses have expressed interest in entering Brazil’s sports betting and iGaming market by applying for a licence. The Secretariat of Prizes and Bets (SPA) has confirmed that all applications submitted by 20 August deadline will be processed by 1 January 2025.
These taxes aim to generate revenue for public funds, but it is essential to find a reasonable balance. Too high taxes can discourage businesses from investing in Brazil, which may, in turn, limit job creation and economic development. The government faces the delicate challenge of optimising tax rates to maximise revenue without preventing economic activity.
The player’s perspective
The tax burden doesn’t end with operators. Players in Brazil also face a 15 per cent tax on their winnings. While this might seem straightforward, it adds an additional layer of complexity to the overall gaming experience.
If not communicated clearly, this tax can even discourage players or push them towards the unregulated black market. It’s crucial for players to understand these implications and for operators to provide clear and transparent information about tax obligations.
A “sin tax” dilemma
One of the most perplexing aspects of Brazil’s tax regime is the classification of certain gaming activities as “sins.” The inclusion of fantasy sports in the Selective Tax, often referred to as the “sin tax,” was a prime example. Unlike traditional gambling activities, fantasy sports rely on skill and knowledge, not chance. Labelling it as a “sin” was not only inaccurate but also counterproductive.
Fortunately, Brazil has recently recognised the distinction between games of skill and chance, aligning its regulations with global best practices. In the latest SPA ordinance, fantasy games were excluded from the list of virtual fixed-odd betting online gaming events. This positive development is a step in the right direction for the industry.
A worth-the-risk market
While high taxes are a significant obstacle, it’s important to remember that other countries, such as the UK, also impose substantial taxes on the gaming industry. Yet, these markets continue to thrive.
The key to success in Brazil lies in understanding the local market, building strong relationships with regulators, and delivering exceptional customer experiences. Those who can navigate the complex tax landscape and offer compelling products will undoubtedly get the rewards.
Brazil is a high-stakes game, but the potential payoff is immense. Recognising this, SOFTSWISS is currently in the process of securing certification for its Casino Platform and Sportsbook. The company is prepared to adjust its software to meet responsible gaming requirements once they are rolled out by the government. Yes, the challenges are significant, but the opportunities are even more promising.
