Brazil: The increase in taxation on the contributions of the MP alternative to the IOF has been withdrawn

The government’s original proposal aimed to raise the rate from 12% to 18% on GGR (Gross Gaming Revenue) — the gross revenue from betting, meaning the total amount collected by platforms minus the value paid out in prizes to bettors. With the withdrawal of this increase, the fiscal impact of the MP will be reduced.

According to Zarattini, the exclusion of this provision, combined with the maintenance of tax exemptions on financial investments, should reduce the government’s initial revenue forecast by about R$3 billion. The economic team had expected to raise R$10.5 billion in 2025 and R$20 billion in 2026 through these measures.

Exemptions Maintained

The rapporteur also confirmed the maintenance of the Income Tax exemption on LCI (Real Estate Credit Bills), LCA (Agribusiness Credit Bills), and LCD (Development Credit Bills). The government had proposed taxing these instruments at 5%, and Zarattini initially suggested 7.5%, but eventually backed down in the final version.

Regularization Regime and Crackdown on Illegal Bets

Among the new elements of the report is the creation of the Special Regime for the Regularization of Foreign and Tax Assets (RERCT Zero Litigation Bets).
This program will allow individuals and companies to voluntarily declare funds and assets derived from fixed-odds betting that were not properly reported to tax authorities or were declared with omissions.

The text also includes measures to combat illegal betting, requiring internet providers to remove irregular content within 48 business hours after being notified by authorities.

Financial Taxation

Zarattini maintained the main changes proposed by the government for the financial sector. The reduced 9% rate of the CSLL (Social Contribution on Net Profit), which benefited fintechs, will be eliminated and increased to 15%, aligning it with other financial institutions.

The rapporteur also upheld the unification of the Income Tax rate on financial investments at 17.5%, replacing the previous progressive system that ranged from 15% to 22.5%.

Another maintained measure was the increase in taxation on Interest on Equity (JCP), with the Income Tax rate rising from 15% to 20%.

Negotiations and Voting

On Monday night (6), government and congressional leaders met with Finance Minister Fernando Haddad and Chamber President Hugo Motta (Republicanos-PB), as well as lawmakers Gilberto Abramo (Republicanos) and Pedro Lucas (União Brasil), to seek a consensus on the text.

The vote on the MP by the joint committee, originally scheduled for Tuesday morning (7), was postponed. Zarattini will continue negotiating with legislators, especially senators, before the session resumes at 3:30 p.m.

The MP must be approved by the committee and by the Chamber and Senate plenaries by Wednesday (8) in order to remain valid.