Brazil's New Gaming Legislation to Revolutionize the Industry

During the inaugural session of Gamescom Latam, Carolina Caravana, vice president of Abragrames, highlighted that Brazil's gaming industry would now be divided into two distinct periods: pre and post-2024. The catalyst for this change was the adoption of a novel legal framework in May, which redefines video games in the eyes of the law, introduces fresh incentives for gaming companies, and creates additional avenues for investment. Although the phrase 'new legal framework' may seem dry, the excitement among Brazilian developers is palpable, with many referring to it as a 'game changer'. Abragames president Rodrigo Terra noted, 'We're entering phase two of the Brazilian gaming industry. We've overcome the initial hurdle, and now we're moving on to the next level.' Eros Silva of Apex Brasil added, 'This legal framework offers new perspectives, providing a safe haven for companies, helping the government understand the gaming industry, and attracting investors to Brazil.' The framework allows companies to be classified as video game businesses, rather than simply 'software companies that produce video games'. This distinction will result in a unique code number within the CNAE and different tax rules compared to other software businesses. Terra explained, 'We now have the opportunity for Brazilian states to view gaming from an economic perspective, much like other countries have done in the past.' Games have also been categorized under 'culture', opening up new avenues for grants and funding. A clear distinction has been drawn between video games and gambling or sports betting titles, making it easier for the industry to differentiate itself. This is the most significant step forward for the Brazilian gaming industry since its recognition by the government as a legitimate industry in 2003. The framework is the result of a long-standing campaign by trade bodies and developers. Thiago de Freitas, CEO and founder of Kokku, played a key role in lobbying the Brazilian government as part of the National Commission for Culture. He stated, 'We've been working to identify ways to make the Brazilian industry healthier for developers and address the disparity in the market's performance.' De Freitas noted, 'We're one of the top ten countries in terms of gaming expenditure, but we're not even close to that in terms of revenue for the gaming industry here. We're now in a position to access investment and real opportunities to access equipment that has been difficult for us to obtain, such as dev kits and test kits.' The distinction between games and other tech or entertainment industries will also be a crucial advantage, according to De Freitas. 'We now have the opportunity for video games to be seen as a real industry, not just part of some other industry like film or technology. This will help create policies that are specific to the gaming industry, including investment, equipment access, and taxation.' As seen in other markets, such as the UK and Canada, the introduction of tax incentives can be a significant boon for the gaming industry, helping to fund studios and projects that might otherwise have struggled. De Freitas added that since many of Brazil's largest studios, including Kokku, are built around work-for-hire services, tax incentives can help them pay better salaries and offer larger, more experienced teams to their clients. Chris Bergstrasser, chief strategy officer at OV Entertainment, noted that changes to the tax structure will also make it easier for overseas companies to invest in Brazilian studios. 'In the past, Brazilian companies had to use cash accounting instead of accruals, which made it difficult for us to understand their financial situation and invest in them. That's changed now, and we're seeing foreign investors looking at Brazil with different eyes.' Julianna Brito, who runs Indie Hero, an accelerator for Brazilian independent studios, stated that prior to the legal framework, Brazilian indies were essentially 'invisible to foreigners'. The ability to register a gaming company will make them more accessible to partners and investors. 'One of the first things investors do when they come to a new country is look for companies. If there are many companies, they think the market is developed. Now we can exist and say, 'Hey, there are 1,200 gaming companies in Brazil, providing 20,000 jobs, and we need support.' We can work with the government to get specific projects going.' While government support has been present prior to this framework, the full impact of the framework will take years to be understood. For now, Brazilian developers are confident it will give them a competitive edge on the global stage. Terra described it as the 'most contemporary and modern gaming legislation in the world'. 'Governments need to categorize things, and which box do you put games in? It was under software, and now it's culture or technology? No, it's both. Games are games. It cannot be split. This is the first time a law has had this understanding.' The implementation of the framework will take time, with interministerial work groups being organized to tackle the task. 'I think we'll spend about two years implementing everything, but when it's finished, I think we'll have the best place in the world to start and work in a gaming company,' said Terra. Looking ahead, Apex Brasil's Silva hopes the framework will enable the Brazilian gaming industry to further diversify, with studios dedicated to advertising games, work-for-hire services, and more. 'The game will change for Brazil over the next five years. We'll see small companies being invested in, creating more jobs, helping the economy, and bringing more dollars to Brazil.'