The country takes a big step towards regulating fixed odds betting with the approval of Bill 3,626 in the Chamber of Deputies, which took place this week, and the repercussions are still echoing through the specialized media. Seeing this, as a contribution to the sector, below is a brief interpretation regarding the income tax part of the prize – as this is a point that seems controversial.
Firstly, it should be noted that the replacement for Bill 3,626 of 2023, approved by the Chamber of Deputies, does not innovate in relation to the provisions of the specific taxation law.
Section II in art. 31, establishes the operator's competence to collect income tax levied on the prize, as provided for in art. 14 of Law No. 4,506, of November 30, 1964, observing for each gain (GAIN) the provisions of art. 56 of Law No. 11,941, of May 27, 2009.
Therefore, according to art. 14 of the aforementioned Law No. 4,506, of 1964, (which deals with taxation on winnings in draws and lotteries), profits arising from cash prizes obtained in lotteries, even those for assistance purposes, including those operated directly by the State, sports competitions in general (I believe this is our context for the AQF), including turf competitions and draws of any kind except those for amortization and redemption of shares in public limited companies and advance payments on capitalization bonds.
Returning, article 31 of the novel Bill also mentions art. 56 of Law No. Law No. 11,941, of 2009, which grants exemption in relation to prizes for amounts up to the first range of the monthly incidence table of the Personal Income Tax (IRPF).
Currently, based on the values in the IRPF table, GAINS worth up to R$ 2,112.98 (two thousand, one hundred and twelve reais and ninety-eight cents) are exempt. That said, after delving into the existing legislation and that mentioned in the approved Bill, any reading of this Bill makes clear the legal requirement that income tax exemption be verified for each “gain” obtained. Now, gain for the betting mechanism, as in the concrete case of the AQF, means a simple algebraic operation:
Prize Received (P) – Amount Bet (V) = Win (G);
For every positive G, that is, if there is the aforementioned “profit”, and this G is greater than the current R$ 2,112.98, I understand that it is pacified that there will be an incidence of income tax at a rate of 30%, withheld by the operator permanently.
Otherwise (negative G or G below R$2,112.98), the prize must be exempt from Income Tax. This is the essence of taxation, which must be practiced in the AQF, where there will be no situations, as I have seen in some examples here, in which the bettor will pay income tax and receive less than what he bet.
President of CAIXA Loterias