The President of Brazil, Luiz Inácio Lula da Silva, officially signed Supplementary Act No. 224, which marks a major change in Brazil ‘ s system of taxation and regulation of sports lottery operators. This is both an important initiative of the Government to enrich public finances and a clear demonstration of its determination to strengthen overall accountability for the regulation of the game industry.
According to the new regulations, the rate of gross revenue tax on the fixed rate of compensation will be increased in stages from 2026 to 15 per cent in 2028, from the current 12 per cent. The Government expects to generate additional revenue of approximately R$20 billion (approximately US$3.8 billion) per year, if combined with fiscal adjustments such as financial science and technology regulation and dividends. The most ground-breaking provision of the bill is that financial institutions and payment agencies will be jointly and severally liable for tax liability if they do not cut off their transactions with illegal gaming platforms within a specified time frame, upon formal notification by the Supervisory Authority. Similarly, individuals and enterprises who advertise or promote businesses for unlicensed operators will be equally liable. The Act makes it clear that financial payment agencies “must be jointly liable with the taxpayer for tax obligations arising from the operation of a fixed rate lottery without acting in accordance with a formal notification” and that this liability clause also applies to “individuals and legal entities who advertise or promote an illegal fixed rate lottery operator”. The Ministry of Finance sets the implementing regulations. This strengthened responsibility coincides with the simultaneous legislative agenda of the National Assembly, many of which deal with public security and anti-money-laundering issues, which form a coordinated governance structure with the regulation of the gaming industry.
The supplement also completely re-engineered the Brazilian mechanism for the allocation of lottery taxes: After a specific deduction, 85 per cent is spent on the operating maintenance costs of licensed operators, 3 per cent is allocated to the social security system (half of which is earmarked for medical projects) and 12 per cent is injected into designated public utility funds. The distribution mechanism will be implemented: 87 per cent retained by the operator and 1 per cent received by the Social Security Fund in 2026; and 86 per cent to 2 per cent in 2027. The text of the Act states: “The operational costs and the allocation to the Social Security Fund shall be 87 per cent and 1 per cent respectively in 2026 and 86 per cent and 2 per cent in 2027.” The Federal Tax Office shall be responsible for the preparation of the operational rules for monthly tax accounting. The Act provides that: “The operator shall complete the calculation and payment of taxes on a monthly basis in accordance with the rules designated by the Brazilian Federal Tax Administration.” The final tax rate of 15 per cent is actually a multi-player such programme. The Ministry of Finance initially proposed an 18 per cent increase, followed by an economic assessment and political good offices, which set a 15 per cent ceiling for phased implementation. The drafter of the Bill’s report, Aguinaldo Ribeiro, explained the purpose of the legislation, both “to curb the spread of illegal fraudulent gambling that exploits the vulnerability of low-income groups” and “to enhance the contribution of the industry to society” by strengthening social security funds. The impact of this legislation goes well beyond the scope of tax adjustment. It marks the consolidation of Brazil ‘ s systematic regulation of the lottery market and the strengthening of overall monitoring of financial flows, advertising and market behaviour. Financial institutions and advertisers can no longer rely on the lack of knowledge as an excuse for liability – continuing to facilitate illegal operations with official warning will have clear legal consequences.