Brazil's online gambling and gaming market is currently going through a period of contradictions. At the same time that regulation is consolidating in the country, separating the wheat from the chaff and providing the country with impressive revenue figures, the sector is seeing its sustainability threatened by attempts to revise or change taxes that are unconstitutional.

An example of this is the advocacy of retroactive taxation (from 2019 to 2023) for fixed-odds operators domiciled abroad, referring to the period when the sector was unregulated and therefore without the incidence of taxation. The idea was recently presented by Receita Federal's special secretary Robinson Sakyama Barreirinhas, when he was invited by the Parliamentary Commission of Inquiry (CPI) on gambling in the Federal Senate.

This requirement has no support in Brazilian law and is expressly prohibited by the Federal Constitution. Article 150(III)(a) is very clear in defining the principle of non-retroactivity of taxes, which prohibits the collection of taxes in relation to taxable events that occurred before the entry into force of the law that instituted or increased them.

From 2019 to 2023, in Brazil, the regulation of the exercise of economic activity by fixed odds betting operators was under the aegis of Law 13. 756/2018, which established that fixed odds betting lotteries would be authorised or granted by the Ministry of Finance and operated exclusively in a competitive environment, with the possibility of being marketed through any commercial distribution channel, both physical and virtual" (art. 29, §2).

This regulation, however, had limited effectiveness during this period, as it also stated that, from the date of its publication, the Ministry of Finance would regulate the concession or authorisation for the operation of this type of lottery for a period of up to two years, extendable for an equal period, which only occurred in 2024. 

That is why, without the aforementioned regulatory rule of the Ministry of Finance, or in other words, due to the regulatory gap between 2019 and 2023, in the absence of infra-legal rules providing for the authorisation or concession to exercise the economic activity in the national territory, there was no possibility of taxing a company operating this type of lottery in Brazil.

This means that fixed odds betting operators domiciled abroad between 2019 and 2023 cannot be retroactively charged national taxes, as this would only apply to companies that were part of an effective Brazilian legal-tax relationship during that period, which was not constituted due to the limited validity of the rule. Only from 2024, with the correction of the aforementioned limitation in Law 13.756/2018, will the tax be levied on taxable events. 

For the regulated gambling market in Brazil to be effective and advance, it is essential that the State guarantees the constitutional interpretation, as indicated in article 150 of the Constitution. The Magna Carta prohibits the Union, the States, the Federal District and the Municipalities from levying or increasing a tax without a law establishing it. Taxes can only be levied once the exploitation of the respective economic activity has been regulated and the law is capable of producing its effects.

It is therefore abundantly clear that it is impossible to retroactively apply the indicated taxes to fixed odds betting operators domiciled abroad in the periods between 2019 and 2023, given the principles and rules that are essential for the successful implementation of the Brazilian constitutional and taxation legal system. Any measure that deviates from the Federal Constitution will seriously jeopardise the effectiveness of the regulation of the sector and of what is already one of the largest sports betting and online gambling markets in the world.

*Plínio Lemos Jorge is a lawyer, president of the National Association of Gaming and Lotteries (ANJL), partner of the law firm Lemos Jorge Consultoria Jurídica, with a master's degree in Tax Law from the Pontifical Catholic University of São Paulo (PUC-SP), PhD in Business Law from the Nove de Julho University, former judge of the Tax Court of São Paulo and specialist in tax consultancy.