Sponsorship is ubiquitous in the sports world and a number of media reports have recently appeared about it. Think of the reporting about the (circumstances of the) termination of the sponsorship contract between Nike and Neymar da Silva Santos Júnior and the extension of the sponsorship contract by Quick.Step for the cycling team of the same name. In addition, as a result of the upcoming EURO 2020, we will also see our Red Devils reappear in numerous advertising campaigns from official sponsors of the Royal Belgian Football Association.
This offers us the opportunity to briefly reflect on 'sports sponsorship'.
The sponsorship contract: no specific legal framework
There is no specific national legal regulation for (sports) sponsorship contracts. In the absence of a specific legislative framework, a sponsorship contract is drawn up without form and the content must fall back on the provisions of general contract law and the common law provisions from, for example, contracting or renting.
Parties to the sponsorship contract
A sponsorship contract is concluded between a sponsor (the party paying a fee) and a sponsored (the party that agrees to the promotional association and receives compensation for it). This often involves a private company (for example a bank or drinks producer) that sponsors a sports federation, sports club or individual top athlete.
A sponsorship contract implies mutual commitments on the part of the sponsor and sponsor.
In terms of sponsored, this mainly concerns:
- an association agreement: the establishment of a promotional association between (products of the) sponsor and the sponsorship object;
- publicizing the promotional association: ensuring media attention and promoting the association;
- an image commitment: refraining from inappropriate behavior that could negatively affect the sponsor's image (eg, deliberate doping use);
- a loyalty commitment: to a constructive cooperation and to refrain from negative statements about the sponsor.
For the sponsor it concerns:
- paying a sponsorship fee (in cash and/or in kind) to the sponsor;
- an image commitment: refraining from inappropriate behavior that could negatively affect the sponsor's image (eg acting fraudulently);
- a loyalty commitment: an equivalent commitment as in respect of the sponsored person.
Building on the mutual commitments, the sponsorship agreement therefore provides for, for example, the modalities of the sponsorship compensation to be received/paid and the stipulations of circumstances that offer one of the parties the possibility to terminate the sponsorship agreement immediately (for example as a result of doping practices or fraudulent acts).
Sponsorship and taxation
Sponsoring is in principle, subject to certain conditions, 100% tax-deductible as a professional expense if the sponsorship gives rise to publicity for the company (eg logo or name on clothing or boarding).
In principle, VAT is also deductible. A distinction must be made in this regard, depending on whether sponsorship is in cash or in kind.
In the case of sponsorship 'in cash', the VAT is fully deductible if the advertising character can be demonstrated and on receipt of a compliant invoice. In the case of sponsorship 'in kind', the VAT on the purchase invoice of the freely transferred property is deductible if the price does not exceed 50.00 euros (excl. VAT). If the value is higher, the VAT can only be recovered if the advertising character is proven and both the sponsor (for the delivery of the goods) and the sponsor (for the advertising) draw up an invoice.
Sports sponsorship is a complex matter in which several things must be taken into account.
A sponsorship contract leads to extra income for the sponsor, while the sponsor can strengthen his image within a specific target audience. In addition, sponsorship on the part of the sponsor is fiscally advantageous, provided certain conditions are met.
It is therefore advisable to pay the necessary attention to drawing up an accurate sponsorship agreement if one wants to avoid conflicts or discussions, between contracting parties or with the tax authorities.