Tax Incentives for Sports Sponsorships in Brazil
The Sports Incentive Law, also known as Lei de Incentivo aos Esportes was created in Brazil in order to promote social projects related to sports. In this article, we will look in more detail about this law and how companies and individuals can benefit from it.
In Brazil, there are incentive projects for different areas in order to increase development across different sectors of the country and the economy. One of the areas that gained special attention over the last few years is sports, especially due to the fact that the country was chosen as host for important sports events such as the 2007 Pan American Games, the 2014 World Cup in Soccer and the Olympic Games in 2016.
Even though it is not intended to fund professional sports activities, the Sports Incentive Law, approved in 2006, aims to encourage individuals and companies to make donations for sports and disability-sports projects in exchange for fiscal benefits, as well as visibility for the companies through sponsorship. The law intends to guarantee the Brazilian population the possibility to practice sports.
In 2014 the Sports Incentive Law was responsible for the deduction of BRL 254 million in taxes that were directed to fund projects pre-selected by the Ministry of Sports.
Who can contribute?
The Sports Incentive Law establishes that both individuals and legal entities can be donors or sponsors of projects that cover sports and disability-sports. In return, the government will grant deductions in their income taxes.
Benefits are granted for donors and sponsors
The benefits granted differ depending on whether the donor or sponsor is an individual or a legal entity.
Benefit granted for individuals
The total deduction percentage cannot surpass the maximum deduction of 6% of their income tax, and the benefits compete with each other. Therefore if the individual contributes to projects in other areas, like those for children, the elderly or arts, the amount destined to each contribution should defined by the donor/sponsor.
Benefit granted for legal entities
For legal entities, there is maximum deduction of 1% of the income tax. Usually the type of companies that most benefit from this law are multinational companies, conglomerates of banking, industries, airlines and telecommunications sectors, among others. Only companies that are under the actual profit taxation arrangement, also known as Lucro Real, can benefit from the deduction.
In the case of legal entities, the benefit doesn't compete with other tax incentives, which means that it's exclusive for the sports sector.
Only the amounts destined for the sponsorship or donation to sports and disability-sports projects approved by the Ministry of Sports which is known in Portuguese as Ministério do Esporte, are deductible.
Who can present sports projects?
The term “proposer” refers to the legal entity which is legally authorized to present projects to the Ministry of Sports in order to receive funds under the Sports Incentive Law. The proposer entity must fulfill the following requirements:
- Be a non-profit purpose entity
- Be an entity registered with the objective related to sports activities
- Be be an active entity for at least one year
- Have no unsolved debts with the Federal Government
Requirements of the project application
There is an extensive list of documents and information to be presented by the entity that pledges for the project incentives. The basic documentation is:
- Notarized copy of the Corporate Taxpayer's ID, known as CNPJ
- Notarized copies of the statute and its updates, meeting minutes in which the current management was appointed
- Notarized copies of the CPF, which is the Brazilian Individual Taxpayer ID, of the directors and legal representatives of the entity
- Notarized copies of the identity card of the directors and legal representatives of the entity
- Proof of the technical and operational capacity of the proposer
- In the cases of construction or renovation of property, it is necessary to present a proof of the possession of the property
In addition to these documents the proposer must submit the information listed below on the Ministry of Sport website:
- Evaluation request of the project sent to the Technical Commission, with detailed information about the sports activity
- Project description containing justification, purposes, schedules, plans, action strategies, qualitative and quantitative performance targets and planning for the use of financial resources
- Analytical budget and proof that the calculated prices are compatible with the current market or are calculated according to the established parameters of the Ministry of Sports
The Ministry of Sports can request for more documents during the process of analysis, if necessary.