Image rights in sports peculiarity & tax issues


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Sports Law Commission’s Workshop - Amsterdam, August 24, 2011
Image Rights in Sports - Peculiarity and tax issues, Avv. Cristiano Novazio, Assistant Professor in “Sports Law and Sports Contracts” University of Milan - Faculty of Law Administrative Secretary of SPORTS LAW RESEARCH CENTER

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Image rights in sports peculiarity & tax issues

  1. 1. Sports Law Commission’s Workshop Amsterdam, August 24, 2011 IMAGE RIGHTS IN SPORTS Peculiarity and tax issues Avv. Cristiano Novazio Assistant Professor in “Sports Law and Sports Contracts” University of Milan - Faculty of Law Administrative Secretary of SPORTS LAW RESEARCH CENTER -
  2. 2. THE EXPLOITATION OF IMAGE RIGHTS A person’s image is open to a wide range of commercial exploitation, such as endorsement, licensing, sponsorship and merchandising agreements. The right of self-marketing of sportsman involve a series of problems between sport federation and players on one hand and between sports clubs and players on the other hand. SPORTS LAW RESEARCH CENTER
  3. 3. SPORT FEDERATION VS PLAYERS Interest to gain the maximum profit from the exploitation of the sport activities performed by their players. The right of a sports federation to limit advertising activities personally undertaken by the players is subject to the following conditions: 1) the federation must be clearly authorized to do so by the provisions contained in its Article of Association; 2) the restriction can only apply in relation to the competitions in which the association is the organizer or co-organizer; 3) the association must comply with the principles of fair competition and 4) the association must distribute at least part the profit acquired to the players. SPORTS LAW RESEARCH CENTER
  4. 4. SPORTS CLUBS VS PLAYERS The sportsman is free to use his image right, except when the player’s image includes symbols, colours and trademarks of the club. Recently, when the clubs enters into a contract with a player, they have been trying to acquire the ownership of the image rights of their players and this practise is creating several discussions. → strike declared by Spanish players association. SPORTS LAW RESEARCH CENTER
  5. 5. THE EXPLOITATION OF IMAGE RIGHT UNDER THE ITALIAN LAW Often, a sportsmen doesn’t exploit his image rights on his own, preferring to license these rights to a company. According to Italian law, it is possible to license image rights and trademarks to a third person and legal entity, resident in Italy or out of Italy. important principles:  the owner cannot loose total ownership and control over his image rights. For example, it not possible to license one’s image rights for an unlimited period of time or definitely. The only way is for a limited period of time, which must be reasonable (that could be at least from 5 to 10 years).  the licence may or may not be exclusive: in both cases the original owner must be allowed to exercise his personal control over the use of those rights.  the compensation in favour of the owner of the image right’s, a flat fee or royalties on revenues, both on annual or pluriannual basis, can be used. SPORTS LAW RESEARCH CENTER
  6. 6. THE ITALIAN TAXATION SYSTEM Italy doesn’t have a special tax regime for professional players. They are taxed at the ordinary tax rates. This apply not only to income from sports activities performed but also to income derived from the economic exploitation of the image rights of a player. Important principle: An individual sportsman who is resident in Italy is taxed on his worldwide income. SPORTS LAW RESEARCH CENTER
  7. 7. Which is the situation of the foreign players in the exploitation of the image rights? Under the Italian law, individuals who are not resident in Italy are taxed only on income produced in Italy. The criteria for determining whether sports image rights is exploited in Italy are unclear:  It is necessary to analyze the sports image agreements to verify for which country the rights of exploitation has been given and for which kind of activities and where these activities must be performed. SPORTS LAW RESEARCH CENTER
  8. 8. If a foreign player (brazilian) moved from Spain to Italy in August 2009, signing with an Italian club a three year contract, which will be the tax treatment for 2009 and 2010? In 2009 the player maintains, for tax purposes, the Spanish residence (where he spent most of the tax period): if he exploit the image right on his own, he will pay taxes in Italy only if the activities are performed in Italy. If he exploit his image rights thought an Italian company, the taxes will be paid on his income at 30% on the taxable part that it will be 60% of the profit). In 2010, after he can be considered an Italian resident for tax purposes, he will be taxes at the ordinary rate on his worldwide income. SPORTS LAW RESEARCH CENTER
  9. 9. Are there solutions in order to limit the tax pressure for players who work in Italy? This aim is reached assigning the image right to a non Italian company based in a country with a lower level of taxation. The use of a non Italian resident company should still respect the Italian tax system. In particular, under the Italian law, the following situations must be avoided:  the company should not be established in a tax heaven;  the board of directors should not be composed of Italian residents;  the player’s relatives involved in the company should not be resident in Italy for tax purposes. All the economic operations need a specific reason. SPORTS LAW RESEARCH CENTER
  10. 10. Thank you for your attention AVV. CRISTIANO NOVAZIO Assistant Professor in “Sports Law and Sports Contracts” University of Milan- Faculty of Law Administrative Secretary of SPORTS LAW RESEARCH CENTER -