Brazil Regulates CBS Tax and Establishes New Framework for Betting Industry

Brazil’s efforts to reform taxation laws have continued to yield more outcomes, with the latest one being the regulation of the social contribution on goods and services (CBS). As indicated by Decree No. 12,955/2025 published by President Luiz Inácio Lula da Silva in the official gazette, the tax is expected to be imposed on all taxable persons who operate in the country’s market.

Read more Bangladesh Sets Nationwide Crackdown on Illegal Gambling

The introduction of the CBS was prompted by the complementary law no. 214/2025, which provides for the creation of the tax. It was introduced along with another tax, namely the Tax on Goods and Services (IBS). Together, these new taxes are likely to take place of several existing consumption taxes, including PIS and Cofins, among others. Together, they carry a standard rate of around 26.5%.

Regulatory Provisions Applicable to Betting and Lotteries

According to Decree No. 12,955/2025, betting and lottery games will be subject to CBS under an individual tax regime applicable to prediction contests. The latter category includes a variety of betting activities and lotteries. Both taxes mentioned above will be applied to gross gaming revenue (GGR), net revenue less prizes paid.

In accordance with the current regulatory trend, the taxation rate on GGR is expected to increase from 12% to 15% until 2028. Taking into account some other taxes, the total tax liability of betting operators may amount to almost 42% by 2033.

Specific modalities are included in the definition of a prediction contest. They include, among other things, fixed odds, horse race betting, sweepstakes, and fantasy sports. According to the decree, the latter ones mean online games that allow players to create teams made up of real-world players based on statistical analyses.

Calculation Rules and Assessment Basis

The calculation formula of the tax base is provided in the decree as a separate rule. As a starting point, gross revenue needs to be reduced by the total value of paid prizes. Additionally, it needs to be reduced by legally required allocations to public accounts or designated beneficiaries.

Afterwards, the municipal services tax (ISS) should be deducted, and a calculation formula for adjusting the tax base should be applied, considering the combined rate of CBS and IBS. Finally, the adjusted tax base equals the net income obtained by the entity from the gambling activity.

Assessment period for CBS in prediction contests will equal the month during which the event took place.

Read more Battle Loot: Hold and Win Slot Review

Most importantly, prizes received by bettors will not be included in the tax base; however, they will be deductible when the payment is made. In case of negative tax bases, the losses are transferable for five years without adjustment.

Selective Tax and Other Obligations of Taxpayers

Selecting tax, which may be called the ‘sin‘ tax, is also a part of the new tax regime. As a result, the tax rate on betting may increase significantly.

Other than CBS and IBS, companies working in the betting sphere will continue to pay corporate income taxes IRPJ and CSLL. They represent 34% of the profit. At the same time, PIS and Cofins (at 9.25%) will be replaced by CBS and IBS.

Tax Credits and Reporting Obligations

Companies operating under the specific tax regime need to file detailed reports in electronic form about bettors, bet sizes, the location of bets, payments made as prizes, and allocation obligations, among other things. Separate records should be kept in regard to exportation operations.

At the same time, bettors are not allowed to claim any CBS credit, whereas betting companies can use credits for eligible goods and services consumed in their business activity.

Cross-Border Operations

It is important to note that cross-border operations, including those that are allowed by the company in question, should comply with the same rules as national companies. In particular, services provided by foreign entities should also be charged with CBS according to the same criteria. In this case, the service provider is the primary taxpayer, whereas bettors become co-felons in some situations.

As for providing services to users from abroad, they are considered export transactions and therefore are not liable for CBS. For instance, an IP address, geolocation data, and a declaration stating that the customer does not reside in Brazil are necessary to meet this criterion.

Read more Rio Grande do Sul Enacts Strict Limits on Gambling Advertising

Source: BNL Data