New Sports Law will have negative impact on commercial sponsorships

Venezuela
The new Venezuelan Sports Law entered into force on August 23 2011. It is intended to regulate sponsorship within the Venezuelan sports industry, as well as the organisation and administration of sports activities. Physical activities are considered as a public service and sports management as an economic activity for social purposes.
 
One of the main features of the new law is the regulation of public and private commercial sponsorships of sports organisations domiciled in Venezuela. Article 64 states that public and private organisations may sponsor sports organisations that are domiciled in Venezuela and are duly registered with the National Registry of Sports, Physical Activity and Education, as long as they inform the National Institute of Sports within 15 working days of the execution of the corresponding agreements.
 
In this regard, it is understood that commercial sponsorships are subject to the approval of the National Institute of Sports: approval will be granted only to those sports organisations that are registered with the institute, which limits considerably the possibilities of commercial sponsorship; until now, commercial sponsorship was not the subject of any kind of governmental control.
 
Several important parts of the law, such as the commercial sponsorship of athletes, are still incomplete and will be detailed in the implementing regulation (which has not yet been passed). At present, and until the regulation is passed, there is a legal void as to what local or foreign companies willing to sponsor athletes should do.  
 
Another important provision of the law is Article 68, which states that any company whose net annual income is higher than $350,000 should make a compulsory contribution of 1% of their income to sports-related projects, without it being considered as part of their income tax. According to the law, companies may use up to 50% of this contribution for their own sports-related projects and for sponsorship, subject to the guidance of the National Institute of Sports.
 
The new law thus gives more control to the state in connection with the sponsorship of sports-related activities. This may have a negative impact on the sports industry, since private companies will probably reduce their economic support, which is the main source of income for sports institutions and athletes alike.

Andrés Brandt V, Estudio Antequera Parilli & Rodríguez, Caracas

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