Investing in Brazilian Football: The Tax Challenges Under the New Football Corporations Regime

The establishment of Brazilian Sociedade Anônima do Futebol (SAF), the corporate structure that has opened the country's football clubs to foreign capital, brings with it some unique the tax challenges of financing and investing the consequences of which can turn a good club investment deal into a bad one. Investors need to be able to work through where tax bites at each stage of a deal, bringing capital in, converting debt to equity, and taking profits out, together with the football tax regime and the new consumption-tax reform.

This article provides practical guidance for investors, executives and advisers weighing-up potential deals in Brazilian football and highlights the potential tax traps that should be considered before committing capital. ^[1]

Introduction

Since the enactment of Law No. 14,193/2021, which created the Football Corporation (in Portuguese, “Sociedade Anônima do Futebol” or simply “SAF”^[2]), the way in which Brazilian clubs gain access to capital has begun to change. Although most Brazilian clubs still operate under the traditional nonprofit associative model (formed as member associations), the SAF regime allows clubs that elect to adopt it to place their football operations in a separate corporate vehicle capable of attracting investment, issuing structured debt, and meeting governance commonly required in capital markets.

Even though they do not yet constitute a majority, several important clubs have already completed the transition, drawing strategic and financial investors that range from private equity funds to media groups. The experience is still relatively new, but it has already underpinned complex restructurings, including debt restructuring and corporate reorganization, as well as capital injections aimed at growing revenue and modernizing management.

This article does not revisit the SAF Law's corporate and capital-markets framework in detail. For more background, please read this LawInSport coverage of what the SAF Law changed and why^[3] and the capital-markets instruments now open to clubs^[4]. What follows focuses on the narrower, and for any cross-border investor decisive, question of how a SAF is financed and taxed. All worked examples in this article are in US dollars for simplicity.

This article discusses:

• The SAF as an investment vehicle: what happens to any legacy debt?
• The SAF tax regime – when do the TEF (Specific Football Taxation) regime and exemptions apply?
• How capital deployed through foreign exchange impacts tax paid on investments?
• How debt-to-equity conversion change the tax position on investments?
• What are the implications of dividends and investments through local private equity funds (FIPs)?
• How do the new VAT laws affect the tax treatment of income and investment?
• Final remarks & key takeaways for interested investors