In recent years, cases in the media involving the dispute between famous athletes and the Federal Revenue Service of Brazil have become common. The clashes are similar: after gaining notoriety by signing millionaire advertising contracts, sportspeople create Legal Entities to receive revenue, with the consequent distribution of profit to the partners. The reason for the tax agency’s implication lies in the fact that the rate levied on the income tax at the time of payment to individuals can reach 27.5%, whereas the distribution of profits and dividends from Legal Entities to Individuals is – at least until the enactment of the tax reform – exempt from taxation in the income statement. With the repetitive assessment of tax authorities in cases where there is licensing of image rights to third parties, it should be questioned: Is the behavior of taxpayers legitimate or outside the rules of the game?
Many tax assessments carried out by the Internal Revenue Service are based on the argument that the image right is strictly personal and, therefore, not transferable to Legal Entities. Beforehand, it should be noted that the image right can be divided into two distinct strands: the moral aspect of a strictly personal, inalienable, and non-transferable right, which prevents any waiver, and its patrimonial aspect, permissive of economic exploitation and licensing of image rights[1]. Therefore, based on the second definition of the image right, it is possible to infer that the image right of athletes, with their authorization, can indeed be licensed to legal entities. Accordingly, the Superior Court of Justice has already ruled in the judgment of RESP No. 74.473-RJ.
The case law is in line with the legal permission provided for in article 129 of Law No. 11.196/2005, regarding the subjection of intellectual, artistic, or cultural services (either strictly personal or not) provided by an Individual for Legal Entities to the legislation applicable to Legal Entities, at least concerning tax and social security aspects. With regard specifically to professional athletes, given the particularities of the profession, Law No. 9.615/98, also known as the Pelé Law, is notorious. The aforementioned diploma elucidates in the caput of its art. 87-A: “The right to use the athlete’s image may be assigned or exploited by it, through a contractual adjustment of a civil nature and with the establishment of rights, duties, and conditions unmistakable with the special sports work contract”. The sole paragraph of article 87-A, Law No. 9.615/98 is equally interesting, providing for the amount arising from the use of the image and its relationship with the total compensation paid to the athlete, comprising the sum of the salary and the amounts paid for the licensing right.
According to the sole paragraph of the aforementioned provision, the athlete’s compensation is composed of two variables that result in its remuneration: the salary, received by the Individual and regulated by the Brazilian Labor Law regime, or CLT, and the consideration for the licensing of the athlete’s image rights, obtained by a Legal Entity. At this time, it should be noted that the Tax Appeals Administration Board (CARF) through Judgment No. 2.301-.005.812 has already taken the position that the compensation for exploiting image rights cannot be considered salary. Likewise, the understanding of the Superior Labor Court in the judgment of Case E-RR-406-17.2012.5.09.0651, which established the thesis that the licensing of a professional athlete’s image has a civil nature, not to be confused with the special work contract, and consequently, not having a salary nature.
Notwithstanding the case law on the subject and the legal provisions already enlightened, pacification only took place on December 2020, with the judgment by the Supreme Federal Court of ADC No. 66, regarding the constitutionality of article 129 of Law No. 11.196/2005. With the decision, the compatibility of the provision of intellectual, cultural, and artistic services by Legal Entities with the principle of free enterprise was ratified, provided for in article 1, item IV of the Constitution of the Federative Republic of Brazil. In this regard, the Rapporteur Minister Carmen Lúcia expressed:[2]
“(Art. 129, Law No. 11.196/2005) specifies a fundamental dimension of economic and fiscal freedoms and contributes to an environment of greater legal security, by expressly providing for the right of intellectual service providers to define their operating models – which, of course, cannot be ignored by the constituted authorities, including under legality”.
The judgment of ADC No. 66 also discussed the matter in this regard, providing that although the possibility of licensing and outsourcing of image rights is recognized, it must be permeated by the fact that the law cannot cover simulations, and the legal business must be legitimate so that “independent-contractors-only-hiring policy” is not considered abusive. Therefore, the existence of the so-called business purpose is necessary, whatever the demonstration that the creation of the Legal Entity actually occurred for the economic use and administration of the licensing of rights related to the image, and not exclusively for the tax economy.
Given the binding nature of decisions rendered in the Declaratory Action of Constitutionality for the Public Administration, pursuant to paragraph 2, article 102, CRFB/88, the rule that becomes effective is the presumption of legitimacy of contracts that assign image rights of athletes to legal entities. Therefore, in the case of suspicion by the Federal Revenue Service of creating a legal entity without legitimate cause, the proof of such irregularity becomes the responsibility of the tax authority, which is responsible for proving the occurrence of simulation in the legal business.
Conforme o avanço da jurisprudência e as inovações legislativas, cada vez mais as autuações milionárias sofridas por atletas renomados devem sair de cena, iniciando uma nova era para o Conselho de Administração de Recursos Fiscais.
As the case law advances and due to legislative innovations, more and more millionaire tax assessments suffered by renowned athletes must go, starting a new era for the Tax Appeals Administration Board.
[1] MARCONDES, Rafael Marchetti. A tributação da contraprestação paga pelo uso da imagem de artistas e esportistas. Thesis (Doctorate in Law). Graduate program, Pontifícia Universidade Católica de São Paulo, São Paulo, 2015, p. 213
[2] Judgment available at: https://redir.stf.jus.br/paginadorpub/paginador.jsp?docTP=TP&docID=755365380.
Available at: https://politica.estadao.com.br/blogs/fausto-macedo/direito-de-imagem-a-receita-federal-em-campo/.
Autor: Flávia Sant'Anna Benites • email: flavia@ernestoborges.com.br • Tel.: +55 67 99984 1406
