Brazil's New Gaming Legislation Set to Revolutionize the Industry

The introduction of Brazil's new legal framework for the gaming industry is poised to have a profound impact on the sector. According to Carolina Caravana, vice president of the Brazilian games trade body Abragrames, the nation's gaming industry will now be divided into two distinct periods: before and after 2024. The new legislation, adopted in May, redefines video games in the eyes of the law, offering new incentives for gaming companies and creating additional opportunities for investment. This development has sparked excitement among Brazilian developers, with many referring to it as a 'game changer.' Abragames president Rodrigo Terra notes that the industry is now entering 'phase two,' following the initial challenges it faced. Eros Silva of trade body Apex Brasil adds that the new legal framework provides a safe and welcoming environment for companies, the government, and investors to engage with the gaming industry. The legislation allows companies to be classified as video game businesses, rather than simply software companies that produce video games. This distinction will enable them to have their own code number within the CNAE and benefit from different tax rules compared to other software businesses. As a result, Brazilian states will be able to view the gaming industry from an economic perspective, much like other countries such as the UK, France, and Germany. The new framework also classifies games under the category of 'culture,' opening up new avenues for grants and funding. Furthermore, it draws a clear line between video games and gambling or sports betting titles, making it easier for the industry to differentiate itself. This development 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, one of Brazil's largest studios, played a key role in lobbying for the new legislation during his time working with the Brazilian government. He notes that the framework will help address the disparity in the market's performance, where Brazil is one of the top ten countries in terms of gaming expenditure but lags behind in terms of revenue generation. De Freitas adds that the distinction between games and other tech or entertainment industries will be a crucial advantage, enabling video games to be seen as a legitimate industry in their own right. This, in turn, will help build policies that cater specifically to the gaming industry, including investment, equipment access, and taxation. The introduction of tax incentives is expected to have a significant impact on the industry, making it more attractive to foreign investors. Chris Bergstrasser, chief strategy officer at OV Entertainment, notes that changes to the tax structure will make it easier for overseas companies to invest in Brazilian studios. Julianna Brito, who runs the Indie Hero accelerator for Brazilian independent studios, notes that the ability to register a gaming company will make it easier for indies to access partners and investors. However, Abragames' Terra warns that introducing tax incentives will not be an easy task, given the complexity of Brazil's tax structure. The industry will need to explore other ways to create incentives and attract investment. De Freitas notes that interest rates in Brazil are high, making it challenging for studios to secure loans. He hopes that the government will find new ways to invest in gaming companies. The full impact of the framework will take years to materialize, but Brazilian developers are confident that it will give them a competitive edge on the global stage. Terra describes the legislation as the 'most contemporary and modern' in the world, recognizing that games cannot be split into separate categories such as technology or culture. The implementation of the framework has already begun, with interministerial work groups being organized to tackle the task. While it may take around two years to complete, the end result is expected to make Brazil an attractive destination for gaming companies. Looking ahead, Apex Brasil's Silva hopes that the framework will enable the Brazilian gaming industry to diversify further, with small companies receiving investments, creating jobs, and contributing to the economy.