While the repercussions of the Provisional Measure signed by the Brazilian federal government to regulate sports betting continue, on August 15, the Senate held a session to analyze bill 2.796/2021. This bill seeks to determine the legal framework for the electronic and fantasy games industry.

Online slots and slot machines are not among the games included in the bill, but rather it focuses on the so-called eSports, which are defined as those played in a virtual environment based on the performance of athletes in real sports events.

Although, according to the Brazilian Fantasy Sports Association (ABFS), this project could lead to an annual turnover of BRL 30 billion (more than $6 billion), there are fears that the tax reform being studied by Congress could increase costs and discourage investments.

“According to the reform proposal currently being analyzed by the Senate, the maximum rate of Value Added Tax (VAT) would be 25%. With the exception of several sectors included in the House, the expectation, according to the Institute of Applied Economic Research (IPEA), is that this rate will reach 28%. 

“As the ISS tax collected by the Municipalities has rates ranging from 2% to 5%, and the PIS and COFINS have rates that combined account for 9.25%, the sum of these rates ranges between 11.25% and 14.25% of the collection,” as estimated by the Brazilian Fantasy Sports Association.

“This means that, at the maximum rate margin, the sector's tax burden would practically double, impacting the generation of new jobs and the capacity for new investments in a promising market, which can grow up to 120% in the next three years,” the statement added.