In a unanimous decision, the 2nd Panel of the Higher Chamber of the Administrative Council of Tax Appeals (CARF) upheld the Personal Income Tax (IRPF) levy on the assignment of athletes’ image rights received through a legal entity. The case involved Cristiano Espíndola de Avalos dos Passos, a football player who, at the time, played for Sport Club do Recife.

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Tax Assessment Context

During the tax assessment process, the tax authorities concluded that the taxpayer (a professional athlete)—whose sources of income as an individual taxpayer in 2007 primarily included the sports entities São Caetano and Santos, and in 2008, Grêmio Barueri—had established the legal entity AVALOS & CIA ASSESSORIA DE ATLETAS LTDA to receive earnings from the licensing of his image rights in a simulated manner.

According to the tax authorities:

✔️ The legal entity did not declare any financial activity in 2008;
✔️ Payments from the Grêmio Barueri sports club were deposited directly into the player’s individual account;
✔️ The tax authorities disregarded the assignment of the economic exploitation of the player’s image rights to the legal entity, requalifying the facts and determining that taxation should apply to the individual.

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Initial CARF Decision

At the voluntary appeal stage, the CARF initially canceled the tax assessment, ruling that, at the time of the events, there was no legal requirement for formal contracts for the assignment of image rights, as this obligation was only introduced in 2011 by Lei Pelé (Article 87-A of Law No. 9.615/1998).

Additionally, CARF recognized that while image rights are inherently personal, they also possess a patrimonial aspect, allowing them to be licensed to third parties for economic exploitation.

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Reversal of Understanding in the Higher Chamber

However, this interpretation was recently overturned in the Higher Chamber.

The Reporting Counselor, Leonam Rocha de Medeiros, noted that, in theory, there would be no legal-tax irregularity in assigning the right to exploit an athlete’s image to a legal entity. However, upon analyzing the factual context, he determined that there was simulation due to artificiality, justifying the requalification of tax liability to the individual taxpayer.

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Factors Leading to the Conclusion of Simulation by CARF’s Higher Chamber

Absence of a contract between the football player (individual taxpayer) and his legal entity;
The legal entity did not declare financial or accounting activity during the assessment period;
Arena rights and image rights payments for the Panini sticker album were paid directly to the player as an individual, without intermediation by the legal entity;
The player’s legal entity billed exclusively for the club he was playing for at the time, with no other recorded operations.

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Position of the Majority Opinion

With a different rationale, the position of Counselor Mauricio Nogueira Righetti, designated writer of the winning opinion, prevailed.

He ruled in favor of the special tax appeal, stating that only with the enactment of Law 12.395/2011, which added Article 87-A to Law No. 9.615/98, did specific regulations on the assignment of image rights come into force.

Even in that period, taxation should still fall on the individual owner of the right, as it constitutes income of a personal nature, subject to taxation at the individual level.

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Next Steps

The administrative discussion is not yet definitively closed, as the case awaits judgment on the filed motions for clarification.

We are available to assess how this decision may impact other cases related to the assignment of image rights within CARF.