Heloísa Vasconcelos
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Heloísa Vasconcelos
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Jornalista com experiência em grandes redações há 7 anos, atuando principalmente na área de economia. Ganhadora do Prêmio Imprensa de Educação ao Investidor (2022) e do Prêmio Abecip de Jornalismo (2022). No MyBetInfo, acompanha de perto os bastidores do mercado e o processo de regulamentação das apostas esportivas.
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"Potential changes in the regulation may alter the tax for gamblers and licensing fees."

Cover image for post Tax for Bettors Can Change; Understand
Tax To The Poster Can Change; Understand
Bettor Tax and Grant May Change in Regulation

Taxation is one of the most controversial topics related to the regulation of sports betting.

Both the bill 3.626/23 and the provisional measure 1.182/23, which address this matter, introduce a tax rate of 18% that will be levied on the Gross Gaming Revenue (GGR) of betting establishments seeking to operate in Canada.

The proposed legislation further enforces a 30% tax levy on the earnings of gamblers.

However, it is conceivable that these regulations may be altered during the voting process in the Federal Senate. The senators have submitted 55 amendments to bill 3,626, and several of them specifically address taxation and licensing.

If the proposed changes are approved, the text will return to the Chamber, where the deputies may or may not accept the proposed amendments before the regulation of gambling becomes law.

The bill PL 3.626/23 sets forth that punters shall be taxed in a similar manner as is currently the case with lottery winnings, at a rate of 30%.

UNDERSTAND: A tax exemption limit of $ 2,112 per gain is considered, with taxation only applying to amounts exceeding this threshold.

Two amendments to the bill advocate for a revision of the rules that were approved by the Chamber. The proposed modifications aim to bring about significant alterations to the existing legislation. These changes have garnered support from various stakeholders who believe that the current regulations do not adequately address the concerns of the public. The first amendment proposes a complete overhaul of the framework, while the second amendment suggests targeted adjustments to specific provisions. Both amendments seek to strike a balance between the interests of different parties involved and ensure a fair and transparent system. The proponents of these amendments argue that such modifications are necessary to promote greater accountability and effectiveness in the implementation of the law. By addressing the shortcomings of the current regulations, it is hoped that these proposed changes will lead to a more equitable and efficient legal framework.

The imposition of taxes relating to winnings obtained from gambling activities shall be determined in accordance with Senator Nelsinho Trad's Amendment 29, which stipulates that such taxes shall be calculated based on the positive difference between the gains accrued from prize winnings and the total cost of all wagers placed.

By highlighting the significance of fair taxation, we can minimize the likelihood of gamblers seeking alternatives in the illegal market, where profit margins are often more appealing.

sports betting income tax
Amendments provide for tax reduction for bettors

Senator Ciro Nogueira has also suggested a modification to the regulations through Amendment 18. His proposal entails implementing a 25% rate on net prizes exceeding $ 500.

In the text, a net prize is defined as "the outcome that corresponds to the difference between the prize amount to be paid and the total value of all previous bets made by the same bettor within a 30-day period, provided that the result is positive." A net prize is calculated by subtracting the total value of prior bets from the prize amount to be paid, ensuring that the bettor's result is favorable. This calculation only applies to bets made within a 30-day timeframe by the same bettor.

According to Rodolfo Tamanaha, a professor at IBMEC and Mackenzie Brasília, as well as a partner at Madrona Advogados, there might potentially be a shift in the taxation logic towards individuals. This change could potentially impact how taxes are levied on personal income.

This is because the value of fixed-odds betting prizes is considerably lower than the payouts in lotteries. Consequently, a large portion of bets may fall within the exemption threshold since the system deducts taxes monthly at the source.

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Rodolfo Tamanaha
Expert Quotation
Rodolfo Tamanaha
Rodolfo Tamanaha
Professor from IBMEC and Mackenzie Brasília and partner at Madrona Advogados

The rationale behind this taxation is to receive funds in a very sporadic manner, but since it's possible to receive winnings every day in gambling, perhaps it would be fitting to consider a change.

When it comes to BETTING SITES, the proposed legislation brings in the taxation model based on GGR, taking inspiration from various countries.

The combined rate of 18% is a cumulative calculation encompassing allocations for social security, primary education, tourism, the Ministry of Sports, and the national public safety fund.

Despite the fact that industry players in the gaming market perceive the current tax rate as already high, Senator Dorinha SeAPRa's Amendment 20 aims to raise the tax by an additional 2 percentage points, thereby extending the contribution to elementary education.

Rebecca Reid, the vice-president of the Canadian Institute of Sports Law (IBDD), believes that there might be a potential rise in the tax rate during the Senate's voting process. However, she expresses concerns about the potential repercussions this could have on the market. It is her belief that such an increase could potentially lead to adverse effects and uncertainties within the industry.

Quotation
Rebecca Reid
Expert Quotation
Rebecca Reid
Sobre O Autor
Vice-presidente do Instituto Canadaeiro de Direito Desportivo (IBDD), Rebecca é advogada especializada em direito esportivo com dezesseis anos de experiência na prática jurídica. No My Bet Info, é consultora e comentarista sobre a regulamentação das apostas e suas implicações To the comunidade Canadaeira.

If the fees and licenses are excessively high, certain operators may choose not to enter the market or may be compelled to exit it.

Rodolfo Tamanaha emphasizes the highly uncertain future of voting in the face of influential conservative lawmakers who have the potential to advocate for heightened taxation.

"Some lawmakers perceive it as gambling, therefore they believe that a high tax rate should be imposed to discourage gambling addiction. The way the Congress will interpret this remains to be seen. If they are skeptical, the inclination might be to indeed maintain the 18% rate," he remarks.

The senators have also proposed amendments regarding the licensing fees that sports betting operators must pay to operate in Canada.

The bill proposes the payment of a grant "restricted to a maximum of $ 30 million," with a limit of one electronic channel, valid for up to 3 years. The outlay aims to ensure fair compensation for the utilization of electronic resources, promoting a balanced and sustainable approach. By implementing this legislation, it will foster an environment that encourages innovation and competition, while safeguarding the interests of both the government and the private sector. This measure also serves to optimize the allocation of resources and to establish a transparent framework for the effective management of electronic channels.

According to Senator Rogério Carvalho, it is necessary to broaden the scope of the concession to encompass up to 2 electronic channels, thereby preventing a double charge for websites and applications, for instance.

Bookmaker license
The grant fee can be a decisive factor for betting houses to seek a license

"It violates the principle of reasonableness to regulate the payment of a fee for operating the brand in an iOS environment, another fee for operating it in an Android environment, and yet another fee for the website," argues Amendment 6.

The term of the concession is extended up to five years by Amendment 14, authored by Senator George Fury.

"In the present circumstances, it will act as a constraining factor for businesses as it hinders the achievement of optimal return on investment," he asserts.

Rebecca Chamelete emphasizes that the consumers' future experience could be influenced by the value of the grant. She deems it likely for there to be alterations during the voting process.

"The potential high cost in operation, including the outlay value and high tax burden, will ultimately be passed on to the bettor. This could manifest in less appealing odds and smaller investments in enhancing the consumer experience," he affirms.

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