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Professional esports is taxing

A look at LatAm

August 2019

Esports are taking off in Latin America, with the recent creation of national leagues in Chile, Peru, Argentina, Mexico and Colombia. Rapid growth has also seen TV Azteca, a Mexican TV channel, acquire a sports production company with the aim of launching a 24 hour esports channel.

As ever with new technologies, regulation must work hard to keep up with developments. How are tax regimes dealing with the new business models and income streams generated by the boom in esports? We take a look at the tax rules for esports players and industry participants in Colombia, Chile, Mexico and Peru.


The esports community is becoming increasingly important in Chile as the country establishes itself as one of the key Latam hubs for the industry. Riot Games recently announced that the Latin America North and South Leagues will merge to form the new Latin American League, based in Santiago de Chile, which will also be the host city for the League of Legends Latin America final.

Professional gamers are profiting from new forms of compensation, including gifts, sponsorship and money earned through publicity on YouTube channels. Some have achieved ‘influencer’ status on streaming channels and are attracting attention from companies keen to exploit lucrative marketing opportunities.

The Chilean Tax Administration has taken steps to address the related tax implications. It is focusing its efforts on the digital economy, and has recently launched the Tax Compliance Plan 2019. This centres on tax avoidance business models such as base erosion and profit shifting, with the aim of creating a level playing field for all participants.

Chile’s Tax Administration also announced that income earned by influencers (which includes professional gamers) will be taxed according to general taxation rules (i.e. a progressive tax rate up to 35%). Failure to comply may lead to an audit and possible monetary fines.

Currently, there is a digital economy tax bill under discussion in the Chilean Congress, but it remains to be seen if this will extend to cover all aspects of the digital economy, including esports.


Colombia’s esports ecosystem is thriving. Last year saw the introduction of the Professional Videogame League’s ‘Golden League’ into Colombia. More and more professional gamers are now looking to Bogotá, which was recently chosen as the headquarters for the Movistar Latin American League of Legends competition, organised by Telefónica and Riot Games.

Despite this, the Sports Leadership and Positioning Organisation in Colombia does not recognise esports as a “sport”. Because most players have an employment contract or some other contractual obligation to provide their services, its players are not treated differently for tax purposes. Unlike in other jurisdictions, the Colombian Tax Authority has yet to issue any regulation differentiating professional gamer income, including sponsorship money, from more conventional earnings.

Taxation rules are the same for players as for any other citizen paying income tax, and if the professional gamer earns additional income through tournament victories, those earnings are subject to prize taxation rules.


Mexico’s esports sector has huge potential. Earlier this year, the Mexican Federation of Esports was formally recognised as a sports federation by Mexico’s sports regulator, giving esports official, legal status as a “sport”.

In November 2019, Mexico City will host the first Central America and Caribbean Esports Championship, with the participation of the PanAmerican Esports Confederation and the World Esport Consortium. It will be the first esports tournament in the region to offer sports medals to the winners.

In Mexico, players are typically paid by their teams under a “provision of services contract”, with the players either issuing invoices to their teams or hired as an employee and paid a salary. In both scenarios, players are subject to income tax at the normal rate of 36%, with players responsible for their own tax filings if paid under a services contract.

The age of the player can impact the approach taken. Players under 16 years old face challenges registering with the Mexican Tax Administration, and players aged 16-18 may currently only register under salary schemes.

There is no fiscal category for esports under existing tax legislation. As a result, teams currently prefer services contracts, easing the administrative burden of their tax filings. All stakeholders must match their activities and revenue streams to the most appropriate existing tax code – whether for income derived from marketing, sponsorship or prize money – in order to ensure proper compliance.


The 2017 creation of the Peruvian Association of Electronic Sports and Videogames (APDEV), which promotes the professionalisation of esports, was a significant step for Peru’s esports sector. Companies such as Claro and Riot Games have launched esports tournaments, allowing different brands to be directly involved in the Peruvian esports ecosystem. Nevertheless, esports is still not considered to be a sport in Peru.

Currently, gamers are mostly hired under provision of services agreements for esports competitions. Their income generally consists of payments for their services as professional gamers, prizes divided between all team members, or payment of their travel and accommodation expenses. Players may also receive income as streaming casters, influencers or through event appearance fees.

As players are not currently subject to specific tax regulations, their services do not have a specific tax category. Payments and prizes earned through their participation in competitions may therefore qualify as independent personal services income with a withholding tax rate of 8%. Tax collected may be considered by the taxpayers as part of their annual work income tax, which is subject to progressive rates from 8% to 30%.

In 2017, the Peruvian Tax Court issued a decision which categorised income obtained through sale of advertising space on a blogger’s website as third category income, with a withholding rate of 29.5%. If a professional gamer wants to sell advertising space as the owner of a website, any income obtained from that source (e.g. sponsorship, influencers) may be similarly considered as third category income, but there have been no test cases as yet.

With the popularity of esports growing at a significant pace in Latin America, legislators face the difficult task of ensuring that regulations are suitable for such an important and lucrative market. Stakeholders can expect to see the authorities working together with key esports organisations to make the new rules appropriate for all.

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