With the rapid growth of sports betting and online gaming platforms—commonly known as “bets”—it’s essential to understand the tax rules that apply to earnings from these activities. This brief outlines how income tax is levied on prizes and winnings from online betting, in accordance with Law No. 14,790/2023.
- Income Tax Liability
The Brazilian Federal Revenue Service (RFB) considers earnings from online betting to be taxable income. Taxation is applied as follows:
- Bets placed on platforms licensed in Brazil: Winnings are subject to a 15% withholding income tax (IRRF), as established by Law No. 14,790/2023. The betting company is responsible for collecting and remitting the tax.
- Bets placed on foreign platforms: If the platform is based outside Brazil, the bettor must pay income tax through the Carnê-Leão system, using the monthly progressive tax table. The amount paid through Carnê-Leão is treated as an advance payment of the annual income tax (IRPF).
Note: RFB Normative Instruction No. 2,191/2024 states that winnings below R$ 2,112.00 (the first bracket of the IRPF monthly table) are tax-exempt. It also reinforces that lottery and fixed-odds betting prizes are taxed exclusively at source.
- Bettor’s Responsibilities
To avoid tax issues, bettors must comply with the following obligations:
- Annual Tax Return: Winnings must be declared in the “Income subject to exclusive/definitive taxation” section.
- Taxable Base: The taxable amount corresponds to the net prize, meaning the amount won minus the original stake.
- Carnê-Leão Payment: For earnings from foreign platforms, the bettor must calculate and pay monthly tax based on the progressive table.
- Proof of Funds: Keeping records of deposits and withdrawals is crucial to justify the origin of the funds during audits.
- Betting Losses
Losses from betting cannot be used to offset future gains. This means that if a bettor wins on only a few bets out of many, tax must still be paid on the net prizes from the winning bets, regardless of prior losses.
- Skill-Based Games
In games where performance is evaluated—such as poker—taxation differs and is treated similarly to employment income. In these cases, the withholding tax serves as an advance toward the final IR due, much like it does for salaried employees under Brazil’s labor laws.
- Avoiding Tax Scrutiny
To reduce the risk of tax audits or discrepancies with the Federal Revenue, bettors should take the following precautions:
- Bet on regulated platforms: Licensed companies in Brazil already withhold income tax at source, reducing compliance risk.
- Keep all documentation organized: Store proof of winnings, payout dates, and precise amounts.
- Report all earnings: Even small amounts should be declared to minimize the chance of triggering red flags in the tax system.
- Seek professional advice: If your earnings are significant, consider working with an accountant or tax attorney to ensure proper reporting and tax planning.