What is the legal framework for individual transfers? What restrictions can be placed on individuals moving between clubs?

With regard to football, FIFA’s Regulations on the Status and Transfer of Players (RSTP) and the CBF’s National Regulation of Registers and Transfers of Football Players (the CBF Regulation) rule individual transfers of players moving to or from Brazil.

In accordance with the RSTP:

  • a club intending to conclude a contract with a professional must inform the player’s current club in writing before entering into negotiations with him or her (article 18);
  • the athlete will only be able to sign a contract with another club if the contract in force has expired or is due to expire within six months (article 18); and
  • third parties cannot influence in any aspect of the employment relationship between the clubs and the athletes, including transfer-related matters (article 18-bis).

Likewise, the CBF Regulation sets forth that during the last six months of the employment contract, a player is allowed to sign a pre-contract with another team, provided that the current team is notified in advance (article 25). In such case, the new contract is valid and enforceable, but it will only be effective upon the expiration of the term of the current contract.

Also, when the player terminates the relation with the original club before the end of their contract, both the player and the new team are liable for the payment of an indemnification (article 28 of the Pelé Law). In practice, the latter usually pays it. With regard to national transfers, the contractual indemnification is limited to 2,000 times the monthly compensation paid by the former team. There is no limitation to international transfers (article 28, paragraph 1).

For sports other than football, termination is ruled by the Pelé Law and by the same provisions of the Labour Law, which are applicable to employment relations in general.

Ending contractual obligations

Can individuals buy their way out of their contractual obligations to professional sports clubs?

Yes, individuals can terminate the relation with professional sports clubs before the end of the current contract, so a new contract can be signed with another team. In such cases, an indemnification is due to the previous club, as explained in 'Transfers'.

An indemnification is also due if the athlete quits playing for retirement purposes but then gets back to football within 30 months of the supposed retirement (article 28, item I, b of the Pelé Law).

Welfare obligations

What are the key athlete welfare obligations for employers?

According to the Pelé Law, the employer must (i) provide the athletes with the necessary conditions to take part in the sports competitions, training sessions and other preparatory or instrumental activities; and (ii) submit the athletes to medical and clinical exams required for the practice (article 34, items II and III). Clubs are also required to hire life and personal accidents insurances to cover risks to which athletes are subject in their professional undertakings (article 45).

Young athletes

Are there restrictions on the employment and transfer of young athletes?

The Federal Constitution sets forth that working is forbidden for individuals under 16, except if they are hired as apprentices, which is admitted if they are over 14 (article 7, item XXXIII).

The Pelé Law prohibits the professional practice of sports by minors who are under 16 (article 44, item III). However, individuals aged between 14 and 20 can be considered non-professional athletes in formation. For them, a formal contract is executed by means of which they shall be entitled to a financial allowance (article 29, paragraph 4). Such contract does not constitute an employment relationship.

The restrictions to international transfer of young athletes provided for the RSTP are applicable in Brazil (article 46 of the CBF Regulation). Therefore, athletes under 18 cannot be transferred (article 19, item 1 of the RSTP). Exceptions are made if the parents of the athlete have moved to the country for reasons not related to practising football or if the athlete lives in a border region (article 19, item II, a and c).

What are the key child protection rules and safeguarding considerations?

The Federal Constitution is the most relevant legislative act that provides for children’s rights. It determines that it is the duty of the family, as well as of the society and state, to ensure children’s protection (article 227). Also, the Children and Adolescent Statute (Law No. 8,069/1990) is the specific Brazilian statutory law protecting children, including the inviolability of their physical, psychological and moral integrity (article 17).

In case of a violation of a disciplinary rule, athletes under 14 years old will not be deemed liable; instead, they will be submitted to educational help (article 162 of the Brazilian Sports Code). If the violation is performed by an athlete under 18, his or her age will be considered as a mitigating factor when applying the penalty (article 180, item I).

Under the Brazilian Sports Code, any athlete younger than 18 is entitled to have defendants nominated to advocate for his or her interests (article 31).

Club and country representation

What employment relationship issues arise when athletes represent both club and country?

The conditions and matters regarding an athlete representing both club and country shall be defined by an agreement between such entities (article 41 of the Pelé Law).

With regard to football players, the entity that calls the athlete up must indemnify the employer for the period during which the individual is at the national team’s disposal (article 41, first paragraph). For sports other than football, this indemnification is optional (article 94).

Selection and eligibility

How are selection and eligibility disputes dealt with by national bodies?

The criteria for selection and eligibility of athletes are determined by each sport’s confederation. It varies from individual to group sports. The first category normally requires that the athletes have achieved certain accomplishments throughout their careers, like speed records in sports such as swimming or athletics, and ranking positions in others. In group sports, the eligibility relies on the athletes’ professional skills at the sole discretion of the coach.

What are the key taxation issues for foreign athletes competing in your jurisdiction to be aware of?

Brazil imposes worldwide taxation on the basis of residency (rather than citizenship or nationality). Accordingly, resident individuals are taxed on a worldwide basis on their income and gains arising both in Brazil and abroad. Non-resident individuals are only subject to taxation in Brazil if they receive income from a Brazilian source.

Thus, assuming the athletes travelling to compete in Brazil are not Brazilian residents, they should not be subject to income taxation in Brazil on their salaries, image rights, arena rights and any other sort of compensation received from foreign sources. Such athletes would only be subject to Brazilian taxation if they receive payments from Brazilian sources.

Service compensation paid, credited, delivered, employed or remitted by a Brazilian source to or in favour of the non-resident athlete is subject to: (i) the withholding income tax (IRRF) at a 25 per cent rate, owed by the athlete, which must be withheld and collected by the Brazilian paying party (article 746 of Decree No. 9,580/2018 - the Brazilian Income Tax Regulations; (ii) the municipal services tax (ISS), at a rate of up to 5 per cent, owed by the athlete, which should be withheld and collected by the Brazilian paying party - actual ISS rates vary according to the municipality where the services are rendered or where the service importer is located (article 1, paragraph 1, and article 6, paragraph 2, item I, of Federal Complementary Law No. 116/2003; and (iii) contributions to the Social Integration Program and to Social Security Financing (PIS and Cofins), at a total combined rate of 9.25 per cent, owed by the Brazilian paying party. Services imported from overseas are subject to PIS/Cofins when provided by individuals or legal entities resident or domiciled abroad, either executed in Brazil or executed overseas, where the results are verified in Brazil (article 1, paragraph 1, of Law No. 10,865/2004). Any foreign currency exchange transactions entered into in connection with remittances of such compensation overseas would also be subject to the tax on financial transactions (IOF) at a rate of 0.38 per cent, owed by the Brazilian paying party (article 15-B, caption, and article 12, of Decree No. 6,306/2007, as amended - IOF Regulations). Because of the form of calculation of these taxes, their effective tax burden totals approximately 41 per cent. If the financial burden of IRRF or ISS is contractually transferred to the Brazilian paying party, the calculation basis of these taxes must be grossed up and the effective tax burden increases to approximately 59 per cent in total.

Prizes earned in local competitions by non-resident athletes are also subject to IRRF at a 15 per cent rate, unless the athlete resides in a favoured tax jurisdiction (as defined by Brazilian legislation), in which case IRRF would be levied at a 25 per cent rate (article 744, item II of the Brazilian Income Tax Regulations). The Brazilian Federal Revenue Service considers that only prizes paid with no connection to the athletes’ performance would be subject to IRRF at the reduced 15 per cent rate (Resolution of Conflict Ruling No. 9/2012). If the prize is connected to or dependent upon the athletes’ performance, it should be treated as service compensation and thus be subject to IRRF at a 25 per cent rate (the other taxes referred to in the previous paragraph could also be charged in this situation, although not addressed in this specific ruling).

Also, any amounts paid, credited, delivered, employed or remitted as compensation for the exploitation of the athletes’ image rights are subject to IRRF at a 15 per cent rate (article 766 of the Brazilian Income Tax Regulations).

Any specific provisions of applicable double taxation treaties regarding IRRF would prevail and should be considered, including reduced IRRF rates and tax credits available in the athletes’ country of residence for IRRF paid in Brazil.