New Venezuelan Sports Law to affect commercial sponsorship
Por: Ricardo Alberto Antequera / AndrÃ©s Brandt
On August 23, 2011, a new Venezuelan Sports Law entered into force, which is intended to regulate sports sponsorship, organization and administration, as well as the physical activities as a public service and sports management as economic activity for social purposes, since they are citizens’ fundamental rights and a State’s social duty.
One of the main aspects set forth in the Law is the regulation of public and private commercial sponsorship to sports organizations domiciled in Venezuela.
Article 64 states that public and private organizations may commercially sponsor those sports promoting organizations domiciled in Venezuela and duly registered before the National Registry of Sports, Physical Activity and Education as long as they duly inform the National Institute of Sports within the following 15 working days after the execution of the corresponding agreements.
In this regard, it is understood that the commercial sponsorship is subject to the approval of the National Institute of Sports, and it will be granted only to those sports promoting organizations registered with this Institute, which considerably limits the commercial sponsorship figures previously not subjected to any kind of Government’s control.
Several important aspects of the law are still unfinished and will be ruled by its regulation (which has not yet been passed as it should have been within the time set forth therein), such as, for example, the commercial sponsorship for an athlete. Currently, and until the regulation is passed, there is a legal void as per how local or foreign companies willing to commercially sponsor athletes should act, since such is a very common practice in sports related activities.
Another important aspect of this Law is referred to in Article 68, which states that any company whose net annual income is higher than USD 350.000 should make a compulsory contribution of 1 percent of said income, without it being considered as a part of its corresponding income tax.
According to the Law, companies may use up to 50 percent of the contribution stated therein for their own sports related projects and for sponsorship subjected to the guidance of the National Institute of Sports.
In conclusion, this new Law grants more control to the State in connection with the sponsorship of sports related activities, resulting in a negative impact in the commercial development of this area since private sponsoring companies will probably reduce their economic support, which is the main source of income for sports institutions and athletes alike.