Brazil’s president signs into law legal framework for digital games industry in Brazil

Brazilian President Luis Inácio Lula da Silva signed into law the legal framework for the electronic games industry in Brazil.

The project establishes legal basis for gaming activities in Brazil, and promotes contributions to the growth of the market in the country.

As a relatively young industry, gaming always has to be aggressive about getting access to the same cultural and government recognition as other entertainment, as well as tax breaks. Games are also an industry where — at least in most years — there is the promise of job creation in the future.

Rodrigo Terra is president of Abragames in São Paulo, Brazil. He said in a recent interview with GamesBeat that Abragames, Brazilian Association of Digital Game Developers, had advocated for years for the official recognition of games as an industry by the government, as well as tax breaks in light of the potential of gaming to create a vibrant game industry in the future.

Here’s some of the details, via Fernanda Domingues:

• The definition of games – Embracing the duality of software and culture and tearing off gambling.
• Creates a clear definition for game companies and professionals, helping game studios and freelancers
  Stimulates the support for new talents.
• Facilitates the importation of SDK (software development kit) and reduces taxation of equipment and tools.
• Institutionalizes the use of games for purposes other than entertainment, such as therapeutic and educational purposes.
• It avoids prohibition or unnecessary bureaucracy but protects kids and teenagers.
• Funds for innovation in games.
• Tax incentives for cultural production – Up to 6% of all income tax for individuals and 4% for legal entities can be exempt if invested in game production.
• Tax incentives for audiovisual production – a reduction of 70% of the tax due on remittances abroad related to the exploration or licensing of games, as long as they invest in developing independent Brazilian game projects.
• Improves intellectual property protection for games.

Until this legal framework, Brazilian game development companies were under the same economic classification as generic software development companies. With a specific code at the National Register of Economic Activities (CNAE) needed when registering a company, it is possible to monitor the sector separately from all the software development companies using official government databases. With this, mapping the number of companies, jobs, and economic performance of the games sector becomes costly and time-consuming.

Terra said the Brazilian industry has been tracking other political movements on behalf of games around the world, including Canada and South Korea. He noted that Canada, the United Kingdom and France have had tax breaks for many years. It took five years to get to the point of having a bill ready before Congress to do research on the size of the game market, which is huge.

“The Legal Framework for Games will foster sector growth, create jobs, combat illicit activities, and reduce tax burdens,” said Senator Leila Barros, in a statement. “With its approval, the Brazilian game industry will gain more visibility and legal certainty.”

Senator Flavio Arns believes that the proposal will generate benefits across various sectors. In a statement, Arns said, “In parallel, we should see advances in education, culture, health, and employment, with job creation and income generation. This is a law that will allow both the industry and Brazil to grow together.”

Based on a survey, Brazil generated $2.3 billion in revenue in 2021 and it is growing at 5% a year. The country has more than 1,000 game studios and 12,000 workers. That made it the 12th-largest game industry in the world.

In 2022, Brazil was ranked as the fifth-largest market for gamers with 102 million players, according to Newzoo. The industry grew 3.2% that year, even as the world’s game industry contracted by 5%, according to the Brazil Game Survey, released in 2023.

About 80% of the population plays games, with PC and console gamers playing an average of 5.12 hours a week.

“We are celebrating a victory for Brazil, not just the game industry. The Legal Framework will strengthen the ecosystem of creation and production in one of the fastest-growing sectors worldwide, allowing the country to be truly recognized for its enormous potential in this crucial segment of the creative industry,” said Terra, in a statement. “The new law should attract more opportunities for robust private investments, both domestic and international, reduce bureaucratic hurdles for material imports, generate greater regional and federal support for studios, establish fundamental definitions for industry professionals, and pave the way for the creation of a specific National Classification of Economic Activities (CNAE) for the industry.”

Brazilian senators Leila Barros and Flávio Arns authored the bill and proactively consulted various people from the game development industry, including Abragames. A lot of the political activity started in 2021, after some attacks on gaming from conservative politicians.

Since 2021, the game companies have been lobbying the government that they need to be recognized as an industry to qualify for a direct stance with the government. Theoretically, once the industry is defined, it can lobby for tax breaks from the government in exchange for creating good jobs.

A few years ago, many governments and organizations like the World Health Organization (WHO) recognized that games were good for the mental health of people during the pandemic. The bill’s journey in the Senate started in 2022, and it has been winding back and forth on its legislative journey.

“We have one of the largest consumers of technology, but we’re not even close to being organized” like the tech companies and social media firms, Terra said. “Since the 1990s, we were treated like a part of the software ecosystem. The industry organized itself and said to the government that we need to consider video games as an industry per se.”

If the current version of the bill stands, Terra said, “We will have a legal framework that recognizes games as an industry in Brazil.”

Terra said the aim is to open up a horizon of possibilities, end misconceptions about what video games are, and boost the economic development of the sector over the next decades.