The deadline for submitting Income Tax returns in Brazil ends on May 31, 2023 .

And, as usual, this generates a lot of apprehension among taxpayers, due to the possibility of errors in the declaration or delays in delivery.

Furthermore, the complexity of Brazilian legislation in some cases can make this process even more complicated and costly.

Therefore, advance planning, with the organization of documents proving income and expenses together with control of personal accounts, become fundamental elements to guarantee a safer Income Tax declaration without unpleasant surprises.

And this goes for online sports betting!

One of the most frequent questions taxpayers have – and which has been new in recent years – is earnings from online sports betting .

Advertisements in the media in general also contribute to this.

These sites offer a wide variety of bets, including sports betting, virtual sports, casino games, poker, bingo, among others.

However, what many people don’t know is that winnings from these bets must be declared on Income Tax , regardless of where they occurred.

In this context, we will address the legal and tax implications of these activities, as well as how to declare winnings from online sports betting and gaming, both in Brazil and abroad.

Why do you need to declare sports betting on your income tax?

Firstly, we will address earnings from sports betting and online games, in general, from platforms based abroad, these earnings being subject to taxation in the form of the Carnê Leão .

This is because they are income received from abroad by an individual resident in Brazil.

The tax must be calculated and collected monthly, using the progressive monthly table in effect in the month of receipt, and is due on the last business day of the month following receipt of the income.

It is worth noting that there is no legal provision for deductions when determining the calculation basis for the monthly carnê-leão for any losses on bets made.

Therefore, the tax must be calculated based on the amount redeemed from the website and deposited into your bank account in Brazil.

Attention : It is important that the taxpayer has effective controls over the withdrawals credited monthly to their bank account, in order to avoid future problems with the tax authorities.

The tax collection document (DARF) with code 0190 is obtained by accessing the “Carnê Leão Web” program, on the E-Cac portal of the Brazilian Federal Revenue Service, by filling in the amount received that month, if this amount is greater than R$1,903.98.

Access to the “Carnê Leão Web” program is only possible using a digital certificate or the GOV.br portal password , provided that the account has gold or silver seals.

The data filled in and the tax calculations calculated will be saved on the portal and must later be exported to the Income Tax declaration program.

If the taxpayer opts for the pre-filled or online declaration, there is no need to worry, as the information will be automatically imported into their declaration.

It is worth noting that, if the amount received is less than the initial limit in force according to the progressive table, this does not mean that the form must be completed monthly.

In this case, it will be necessary to assess whether or not the taxpayer will be subject to other mandatory situations for submitting the Income Tax return.

This is because these earnings must be included in the tax calculation basis in the Annual Adjustment Declaration (DAA), with the tax paid monthly as a carnê-leão considered an advance on the result obtained in this declaration.

Now that the rules for taxing earnings from platforms based abroad are clear , it is important to explain how it works when sports bets are placed on platforms based in Brazil , as taxation is different.

Law 13,756/2018 legalized the sports betting market in Brazil, however, it has not yet been regulated.

And this tax is exclusive at source, that is, just like in lotteries administered by Caixa Federal, the tax is discounted by the paying source (betting site).

Net earnings must be reported in the Annual Adjustment declaration, in the Income Subject to Exclusive/Definitive Taxation form, and the CNPJ of the platform based in Brazil must be informed, in addition to the description and value.

Recently, the Brazilian Government announced a provisional measure regulating gaming in Brazil .

The document will also address the tax effects for companies and gamblers. The expectation is that this regulation will bring:

• more clarity and legal security for companies and bettors operating in this market;
• create a source of revenue for public coffers;
• encourage investment and the generation of employment and income;
• combats tax evasion and illegality.

So, be aware of whether or not you are required to submit the Income Tax Return or DAA for the 2023 fiscal year.

See the rules to find out whether an individual resident in Brazil needs to declare their taxes for the year 2022, regardless of whether they are a gambler:

1. Received taxable income, subject to adjustment in the declaration, the sum of which was greater than R$28,559.70;
2. Received exempt, non-taxable or exclusively source-taxed income, the sum of which was greater than R$40,000.00;
3. Obtained, in any month, a capital gain on the sale of assets or rights subject to the incidence of tax;
4. Carried out sales operations on stock exchanges, commodities exchanges, futures exchanges and similar exchanges: a) the sum of which was greater than R$40,000.00; or b) with calculation of net gains subject to tax;
5. Regarding rural activity: a) obtained gross revenue in an amount greater than R$ 142,798.50; b) intends to offset, in the calendar year 2022 or later, losses from previous calendar years or from the calendar year 2022 itself;
6. On December 31, you had possession or ownership of assets and rights, including bare land, with a total value exceeding R$300,000.00;
7. Became a resident of Brazil in any month and remained so on December 31; or
8. Opted for exemption from income tax on capital gains obtained from the sale of residential properties under the terms of art. 39 of Law No. 11,196, of November 21, 2005.

What are the consequences for bettors who do not declare their winnings to the IRS?

As we have seen, it is very important to be aware of the rules when declaring your Income Tax , as the Federal Revenue Service is constantly improving the cross-referencing of data and information, which makes it easier to find inconsistencies.

The lack of regulation of online games abroad generates many doubts and misunderstandings, however, on this subject the Brazilian Federal Revenue Service clarified in Consultation Solution COSIT, No. 61 , of February 28, 2018.

For those who don’t know, whenever a taxpayer has doubts about a certain topic, he can ask the Federal Revenue Service for clarifications, and these are recorded, so that they serve as a basis for understanding when a topic is not very clear.

In this specific solution, the IRS clarified that the taxpayer must pay taxes on winnings from bets in the month following receipt, in the form of a Carnê Leão, and must then report this in taxable income, in the Annual Adjustment Declaration.

With the rules clearer, it is now time to pay attention so as not to make mistakes in the declaration. This is because, without due care, the taxpayer may fall into the “fine mesh” – which is when inconsistencies are detected in the declaration, and it is even possible to suffer fines.

The process works like this: when it realizes that there is a disagreement, the Federal Revenue Service gives the taxpayer the opportunity to regularize these pending issues within a certain period of time.

There is a new analysis and, if these documents are not sufficient for proof, the taxpayer may be subject to a fine – which can reach 75% of the tax due.

The fine, in fact, can also be given automatically, that is, without a chance to defend yourself, in cases where the declaration is submitted after the stipulated deadline – which in 2023 runs until May 31st.

In these cases, the minimum fine is R$165.74, which can reach up to 20% of the amount of tax due.

The golden tip is: look for an accounting professional to clarify your doubts and avoid problems with the Tax Authorities.

An experienced accountant is well prepared to provide the best guidance to the taxpayer, from the first steps in preparing the tax return to the best way to deal with the tax return being held up in the tax net. This professional will know how to avoid a headache!

Sources:

• RIR/2018, arts. 118 to 120
• Normative Instruction RFB No. 1,500/2014, arts. 53, item II, and 54
• Cosit Consultation Solution No. 61/2018); Law 13,756/2018