Brazil’s Joint Committee Approves Retroactive Gambling Tax While Scrapping 50% Tax Hike Proposal

A Brazilian congressional joint committee has approved a bill that imposes retroactive taxation on licensed betting operators, although a controversial proposal to raise gambling taxes by 50% was dropped just before the vote.

On Tuesday, lawmakers passed the amended bill by a narrow margin of 13 to 12. The legislation requires licensed operators to pay taxes on gambling operations dating back to 2014. However, the initial plan to increase the gambling tax to 18% of gross gaming revenue (GGR) was hastily removed prior to the vote.

The government estimates that the retroactive tax program could generate around BRL 5 billion ($560 million), roughly equivalent to three years of tax revenue under the now-scrapped 18% rate increase.

Heading into this week, the betting industry had braced for the worst as Provisional Measure (PM) 1,303—containing the proposal for a 50% tax hike—awaited approval. Yet, at the last moment, the bill’s rapporteur, Congressman Carlos Zarattini, introduced amendments that eliminated the tax increase, which many believed lacked sufficient congressional support.

Zarattini’s amendments also established the “Special Regime for the Regularisation of Exchange and Tax Assets” (RERCT Litígio Zero Bets), a new mechanism designed to retrospectively tax operators for gambling activities conducted before the official regulation date of January 1.

The amended PM 1,303 now moves to Brazil’s Senate and Chamber of Deputies for a second and final vote, expected on Wednesday. If not approved by the end of the day, the bill will expire, reverting the gambling tax rate to the previous 12% GGR enforced before the provisional measure was introduced in June.

The approval followed a tense day of negotiations, including a meeting with Finance Minister Fernando Haddad. Zarattini’s updated text also included measures targeting illegal operators, requiring internet service providers to block access to illegal gambling content within 48 business hours of notification.

The RERCT Litígio Zero Bets regime applies a 15% tax rate on gambling activities between 2014 and 2024, accompanied by a 15% fine. According to Brazilian iGaming expert Elvis Lourenço, this means operators must pay 15% income tax on any online gambling assets owned during that period, plus a penalty equal to the tax rate—effectively a 30% total charge.

However, participation in the program is voluntary. Licensed operators will have 90 days from the bill’s publication to join through a self-declaration of assets. “We’ve done everything we can to ensure that the funds from bets, which weren’t paid under the previous administration, now reach the public coffers,” Zarattini said following the approval.

A working group in August estimated that the retroactive tax scheme could raise up to $2.3 billion for the government.

The voluntary nature of the program raises questions about why operators would choose to participate. Udo Seckelmann, head of Gambling & Crypto at Brazilian law firm Bichara e Motta Advogados, said participation could provide legal certainty and protect operators from future tax disputes.

“Voluntary participation might limit future liabilities, demonstrate good faith toward regulators and stabilise relationships with authorities,” said Seckelmann. “However, many operators may question why they should pay retroactive taxes at all, since they entered the market under different legal and fiscal rules.”

Lourenço agrees that the scheme could help operators legitimise previously undeclared profits or assets but noted that some may challenge the tax’s constitutionality. “Operators who deem retrospective taxes to be unconstitutional could threaten legal challenges rather than joining the programme,” he said. Lourenço also cautioned that the proposal remains politically sensitive and could still face further amendments—or lapse entirely.

While the removal of the proposed tax hike is a relief for many operators, companies that operated before regulation may feel uneasy about revealing undeclared assets.

Seckelmann warned that applying retrospective taxes “could undermine legal certainty and investor confidence, discouraging compliance and future investment.” He added, “A fair and forward-looking approach would be far more beneficial for the development of Brazil’s regulated betting market.”

Lourenço, on the other hand, viewed the changes as a step toward stability. “The amendments bring greater clarity and predictability to the Brazilian market, which is a positive development in terms of regulatory stability,” he said. “For operators that generated profits in the pre-regulation period, it provides a clear voluntary route to settle potential liabilities. For those that operated at a loss or break-even, there may be little or no taxable base to declare, making the programme less relevant. Separately, operators that consider any retroactive taxation unconstitutional retain the option to litigate.”

Seckelmann concluded that if PM 1,303 is approved, the industry should engage constructively with authorities. “If the PM is approved with such proposal, operators should analyse the fiscal impact, engage with industry associations and prepare for regulatory or judicial developments,” he declared. 

By fLEXI tEAM