Tax reform changes how betting taxes are calculated starting in 2027.
The tax reform established a specific regime for sports betting companies, and determined that the Selective Tax be included in the calculation base of the IBS (Tax on Goods and Services) and the CBS (Contribution on Goods and Services). The two new taxes will be levied starting in 2027, according to the Folha de S.Paulo column 'What Tax Is This?'.
The measure was detailed during the Consumer Tax Reform Course, held by the Federal Revenue Service in partnership with the CFC (Federal Accounting Council).
With the entry into force of IBS and CBS in 2027, betting houses will begin to follow the regime of so-called prediction contests. This category includes fixed-odds betting, lotteries, raffles, horse racing, fantasy sports (games based on the lineup of virtual teams with real players) and other modalities, carried out both in physical and virtual environments.
The tax base will not be the total volume wagered by bettors. The calculation starts from what is called own revenue: the total collected from bets, less prizes actually paid and mandatory legal allocations, followed by the addition of the Selective Tax. IBS and CBS are levied on this final value.
The Brazilian Federal Revenue Service highlighted that the Selective Tax, created to target goods and services considered harmful to health or the environment, does not function merely as an additional tax on bets. It forms part of the tax base for the new consumption taxes. Therefore, IBS and CBS are levied on a value that already includes the Selective Tax itself, thus increasing the taxable amount. The Selective Tax rate has not yet been defined.
In a hypothetical example presented by the tax authorities: starting with R$ 100 in total revenue, with R$ 40 in prizes paid, R$ 10 in legal allocations, and R$ 2 in PIS, Cofins, and ISS taxes, the Selective Tax base would reach R$ 48. With a hypothetical rate of 15%, the Selective Tax would be R$ 7,2. This amount would be added to the base of R$ 48, raising it to R$ 55,2. Applying the reference rate of 28% for IBS and CBS, estimated by the IBS Management Committee at the end of July 2026, the total taxation would reach R$ 15.456.
The tax authorities also clarified that only prizes actually paid to the bettor are deductible. Amounts awarded but not claimed by the winner remain as company revenue and cannot be used to reduce the taxable base.
Tax burden starting in 2027
Currently, betting companies authorized to operate in Brazil collect IRPJ (Corporate Income Tax), CSLL (Social Contribution on Net Profit), PIS (Social Integration Program), Cofins (Contribution to Social Security Financing), ISS (Service Tax), and a 13% contribution on GGR (Gross Gaming Revenue), destined for social security, education, security, and other purposes.
In 2027, the current tax burden will be supplemented by IBS and CBS, which will replace PIS and Cofins, and the Selective Tax. The contribution on GGR will also rise to 14%. In 2028, the percentage will increase to 15%.
The Comsefaz study indicates that, until mid-2024, payments from individuals to the arts, culture, sports, and recreation sector and transfers from companies back to families remained at relatively similar levels. From 2025 onwards, payments to the sector grew significantly, while transfers in the opposite direction advanced at a much more moderate pace. "This behavior indicates that the sector began to absorb a substantial volume of resources from families without proportional return, a typical characteristic of betting markets, in which only a portion of the wagered amounts returns to players in the form of prizes," states the Comsefaz document.
