The Taxation of Image Rights in South Africa : Validity of Tax Minimisation Schemes

Abstract

Sport, undeniably, plays a large role in society today. Over the years it has developed into an immensely lucrative industry, not only on the field of play but also off the field. In the modern-day digital environment where a vast portion of the world population have access to sport broadcasting platforms such as SuperSport and social media platforms such as Instagram, many sport stars have become household names and cultural icons. Most of the leading commercial brands are spending large amounts of money in the form of sponsorships and endorsements to secure association of their brand with the image of sports stars. The commercialisation of sports stars’ image rights has created a whole new source of income for them. Cristiano Ronaldo’s main income for the year 2020 is a salary of approximately $60 million (approx. R1 billion), slightly less than the previous year due to a 30% pay cut in the wake of the coronavirus pandemic. His second source of income is derived from endorsements, which on its own is worth an additional $45 million (approx. R760 million). These significant streams of income can temp sport stars to enter into creative schemes which attempt to minimise the high taxes imposed on them. One such scheme is the establishment of a dedicated company to manage their image rights and to receive monies paid for the use of their image rights. These Image Rights Companies (IRCs) are typically registered in low tax jurisdictions. This dissertation evaluates whether South Africa is currently in a position to regulate such schemes. As a basis, a legal comparison was performed between two prominent sports nations namely the United Kingdom and Spain.