Formula 1 declared “event of exceptional public interest”

Last week, the Official Gazette of the Spanish State published Royal Decree-Law 26/2020, of July 7, on economic recovery measures to deal with the impact of COVID-19 on transportation and housing. The royal decree-law (“RDL”) includes two major changes that will affect the world of sports:

• The Spanish Formula 1 Grand Prix is declared an “event of exceptional public interest.”
• Amendments have been made to RDL 5/2015, of April 30, on urgent measures related to the sale of audiovisual rights for professional soccer games.

The first measure signals the state’s clear support of the Spanish Formula 1 Grand Prix because, by declaring it an “event of exceptional public interest”, the state encourages private sector interest in the project by including the major tax incentives specified in the regulation.

These incentives help to increase the contribution of funds to hold the activities, and the promotion of the event through advertising campaigns that include the event’s logo.

More specifically, Spanish Act 49/2002, of December 23, on the tax regime of non-profit organizations and tax incentives for patronage, provides major tax benefits, including most notably for these purposes, a deduction of multi-annual advertising and marketing costs paid to promote events.

As we commented in our post of April 11, 2017, the traditional way to sponsor these events is for the sponsor to: (i) make an outright, irrevocable and unconditional donation to the event that will serve as a reference for determining the applicable deduction; and (ii) benefit from the tax incentives under Act 49/2002, and especially a payment deduction of 15% of the advertising and marketing costs paid to promote the event in question.

Moreover, one of the main changes the RDL 15/2020, of April 22, made to RDL 5/2015, is that it granted the Royal Spanish Soccer Federation (“RFEF”) the power to centralize sales of the audiovisual rights of amateur men’s and women’s clubs, because before that the RFEF only had the power to sell the Copa del Rey and the Supercopa de España football competitions.

Thus, the eleventh final provision of the royal decree-law published last week added two new paragraphs to section 1.1 of RDL 5/2015, to clarify the royal decree-law’s scope of application.

Specifically, it determines that audiovisual content comprises the events occurring on the playing field, including the areas of the sporting venue visible from it, from two minutes before the scheduled game time to one minute after the game ends, and they include the rights for live and recorded broadcasts of full games, game summaries and game highlights, for use in the domestic and international markets.