The Provisional Measure (MP) was enacted in June to offset the repeal of the IOF (Financial Operations Tax) increase. The text provides for the levying of Income Tax on new securities issued such as letters of credit (LCA and LCI), certificates of receivables (CRA and CRI), and incentivized debentures. The rate is 5%. For other securities already subject to income tax, the rate is set at 17.5%. The same percentage will apply to crypto assets, which will no longer be exempt on transactions up to R$35,000 (US$6,285).
Another provision increases the tax burden on sports betting. Taxation on revenue from fixed-odds bets increases from 12% to 18%. The rate applies to the Gross Gaming Revenue (GGR) paid by companies, which is the difference between the total bets and the total paid in prizes and other taxes.
The increased tax burden has been highlighted by the online betting and gaming industry as a measure that could cause significant damage to the country, potentially leading to companies abandoning their operations in Brazil. Furthermore, there are over 100 operating license applications pending in the Betting Management System of the Secretariat of Prizes and Betting (SPA), whose license holders may be able to withdraw their licenses.
Considering that the licensing fee costs R$30 million (US$5.4m), it is estimated that revenue losses of over R$3 billion (US$540m) will result from the withdrawal of businesses awaiting the SPA's decision.
Furthermore, the market has indicated that the increased tax burden will force the sector to bear more than 50% of taxes, making it impossible for licensed companies to operate and encouraging illegal betting sites, which do not pay taxes and can attract players with better offers.
The Provisional Measure is being reviewed by a joint committee of deputies and senators, chaired by Senator Renan Calheiros (MDB-AL), with Congressman Carlos Zarattini (PT-SP) as rapporteur. The committee is expected to hold four public hearings before the vote, scheduled for August 26th. Afterward, the Provisional Measure will be reviewed by the plenary sessions of the Chamber of Deputies and the Senate.
The extended validity of the Provisional Measure was originally scheduled for October 22nd, but this deadline was shortened by 14 days due to the lack of an official parliamentary recess this year.
According to the Constitution, legislative proceedings are suspended between July 18th and 31st, but only if Congress has approved the Budget Guidelines Bill (LDO), which has not yet happened. This means that the interruption of deadlines that would occur due to the recess does not occur.
Source: GMB
