Brazil’s ANJL Challenges Betting Investigation And Retroactive Taxation Claims

The National Association of Games and Lotteries (ANJL) has challenged a request concerning the operation of a sports betting company in Recife by Brazil’s Federal Revenue Service (RFB) and the Public Prosecutor’s Office (PPG).

The association raised concerns about potential discrimination and what it described as a “back door tax” on betting activity that took place before Brazil’s regulated market was fully established.

Bernardo Freire, legal director at ANJL, argued that applying taxes to transactions from a period when no formal tax structure existed would conflict with Brazil’s constitutional principles.

It is impossible to tax that which did not exist, Freire said.

Regulatory Gap Before 2024

Fixed-odds betting was legalised in Brazil in 2018, but the framework did not come into effect until 2024.

According to ANJL, betting operators during this period were not assigned a specific economic activity classification by the Federal Revenue Service. There were also no official channels through which companies could report and pay taxes on betting activities.

How could you pay taxes before regulation? You couldn’t, because there wasn’t even a tax classification, Freire said.

ANJL said the lack of a regulatory and tax framework should be considered when authorities assess financial transactions that occurred before the current system was established.

The association also addressed the corporate structures used by operators during the period. Freire said many companies established their corporate offices overseas while contracting service providers in Brazil.

According to the association, winnings were transferred through international financial institutions and so-called “pool accounts”, while international transfers were subject to IOF taxation.

Freire argued that this structure did not in itself constitute money laundering and said it was used by an estimated 90% to 100% of companies.

Federal Revenue Disputes Interpretation

Robinson Barreirinhas, Special Secretary of the Federal Revenue Service, has presented a different interpretation of the activities under investigation.

He said evidence indicates that betting activity had been taking place in Brazil for approximately seven years, including around five years before it was formally authorised to operate on a regular basis.

The evidence shows that this organization was already present in Brazil, with employees and beneficiaries in the country, but without paying any taxes or being subject to Brazilian regulation, Barreirinhas said.

ANJL has challenged both the nature and approach of the investigation.

The association said the companies involved had previously made themselves available to authorities and indicated that they could provide explanations and access to their accounts.

ANJL also questioned what it described as regional selectivity, pointing to the investigation’s focus on brands owned by entrepreneurs from Pernambuco and Brazil’s Northeast Region.

Economic And Constitutional Concerns

The association also highlighted the economic contribution of companies involved in the investigation.

ANJL cited Betnacional as an example, stating that its merger and acquisition transaction generated more than R$1bn in taxes, which the association described as the largest transaction of its kind in Pernambuco’s history.

The company is also estimated to support around 2,000 direct jobs.

ANJL said the betting industry had sought to develop a self-regulatory framework and pay taxes even before the federal government introduced a comprehensive regulatory framework.

The association therefore argues that activity during the previous regulatory period should be assessed according to the laws and conditions that applied at the time.

Following the operation on 28 August, ANJL expressed concerns about potential breaches of constitutional protections during investigations and legal proceedings involving the betting sector.

The association highlighted the principles of the presumption of innocence, the right to adversarial proceedings and the right to a full defence, arguing that these protections must apply regardless of the nature of an investigation or the economic activity involved.

ANJL said it recognises the jurisdiction of the relevant institutions and respects constitutional rights and the right to defence, while expecting the cases to be reviewed.

Any responsibilities must be established through the appropriate procedures, with respect for due process of law and the decisions of the competent authorities,
ANJL added.