IOF jumps 821%, impacting iGaming — Hugo Baungartner says effects will be short-lived as sector quickly adapts
All of Brazil has been talking about one topic in recent days: the tax increase on international transfers. The federal government, through , increased the rate of the Tax on Financial Transactions (IOF) for payments of international services from 0.38% to 3.5%, an increase of approximately 821.05%. The new decree impacted many sectors, but the online gaming and betting sector was particularly affected, as most companies are heavily dependent on international providers.
In addition to the IOF, other taxes also apply to payments made abroad, such as Withholding Income Tax (IRRF), which can reach 25% if the destination is a tax haven; the Contribution for Intervention in the Economic Domain (CIDE), at 10%; the PIS/COFINS-Import, around 9.25%; and the Service Tax (ISS), which varies from 2% to 5% depending on the municipality. As a result, the total cost of an international remittance can exceed 52.57%, squeezing the profit margins of operators.
What does this directly impact? Many Brazilian companies still depend on international suppliers that lack a legal presence in the country, especially in the gaming sector. With the new tax structure, this dependence becomes economically much more difficult to maintain.
What is the need for the new taxes?
The IOF increase is part of a government project with several measures aimed at balancing public accounts. The government’s economic team expects to collect around R$ 20.5 billion in 2025 with the new rates. However, since the changes were announced, the federal government has received considerable criticism and pressure from the market and has decided to backtrack on some measures, such as the IOF increase for applications of Brazilian funds abroad, while keeping the zero rate for these operations.
The decision to increase the IOF, although justified by the argument of increasing revenue, brings relevant consequences for sectors that deal with payments abroad, such as betting operators and iGaming companies, especially in the current scenario of betting regulation in Brazil. The increase in the tax burden puts the viability of many business models operating in the country at risk.
Hugo Baungartner, Chief Business Officer of Sports Gaming Brasil, believes that the impact of the IOF increase will be only temporary, as the market trend is clear: the majority of international providers have already understood the need to establish themselves in Brazil to avoid the heavy tax burden on remittances abroad. According to him, although there is still a resistant minority, the Secretariat of Prizes and Betting (SPA) itself has already indicated that, starting in the second half of the year, all suppliers must be legally established in the country. In this scenario, the IOF change acts as a catalyst, accelerating a movement that was already underway.
“The vast majority of providers have already understood that they need to be in Brazil to avoid unnecessary taxes. Today, there is still a minority that has not yet been convinced that they need to be here,” said Hugo.
Turning the problem into an opportunity
Despite the widespread complaints, some see this change as a chance for Brazil to strengthen its position in the sector. Currently, the country is a major consumer of iGaming content, but does not participate in the creation or export of these technologies. With suppliers establishing themselves locally, Brazil could both retain more value within its own economic chain and become a hub of innovation in online gaming in Latin America.
In addition to generating highly qualified jobs in areas such as IT, support, risk management, and compliance, this new dynamic would help form a generation of professionals specialised in iGaming, an industry that continues to grow year after year in the country. Startups, universities, and research centres could also benefit from partnerships and training programmes.
The future is here — or will become very expensive
The IOF increase can indeed be seen as a problem for the betting and online gaming sector, but it is still possible to make lemonade out of lemons. The dependence on international suppliers, which has always been a reality, now represents a financial risk too high to ignore.
If operators and foreign developers view Brazil not only as a consumer market but also as a base for operations and innovation, the coming years could mark the beginning of a new phase for national iGaming — one that is more self-sufficient, more competitive, and with a much more sustainable ecosystem.
In the end, the decision lies in the hands of all parties involved: companies, the government, and investors. The game has changed — and those who want to keep playing will need to adapt, and fast.
This article was first published in Portuguese on 27 May 2025.
