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Assignment of Highly Personal Image Rights: What Does Case Law Say?
The assignment of image rights between artists or athletes and their own companies raises complex tax challenges. Current case law supports these operations if they are valued at arm’s length, but requires personal income tax to be applied to income from highly personal services performed directly by the individual.
A recurring and relevant issue in the entertainment and sports industries is the valuation of transactions involving the assignment and exploitation of image rights by artists and athletes through entities that manage and coordinate their professional careers.
In most cases, these entities are fully owned by the artists or athletes themselves, which places us in a transfer pricing context that has sparked numerous legal controversies.
Central Issue: Who Should Be Taxed?
The problem arises in determining whether the income derived from such transactions should be attributed to the results of these related entities or whether, instead, it should be attributed to the personal income tax (PIT) of the individual, i.e., the artist or athlete.
The Right to One’s Image and Its Assignment
Although the right to one’s image is a fundamental and inalienable right recognized in Article 18.1 of the Spanish Constitution, the National Court stated in its Ruling of April 13, 2022:
“[…] it may, however, be subject to assignment by the holder of such right, authorizing a third party to exploit their own image, even for compensation, without this implying a renunciation of that right (SCC 231/1988 and 117/1997).”
This indicates that, although it is a highly personal right linked to privacy, it also has a clear patrimonial dimension that allows for its commercial exploitation.
Lawful Transactions—But with Tax Nuances
Based on this premise, numerous image rights assignment transactions to related entities have been structured, particularly in the entertainment and sports sectors.
These are fully lawful operations, as recognized by the Catalonia High Court Ruling 610/2019, which clarifies:
The fact that there is a different tax rate between individual income and corporate income does not imply that companies are being used for fraudulent tax purposes.
The Point of Friction: Highly Personal Services
Tax controversy arises when the services provided by the assignee entities of the image rights — contracted by third parties — are actually performed by the artist or athlete themselves.
In such cases, the courts hold that:
- The income generated must be taxed as earnings of the individual (natural person).
- It must be attributed to the PIT of the artist or athlete.
- The transaction must be valued in accordance with the arm’s length principle.
This view is reflected in the Madrid High Court Ruling 738/2019.
Jurisprudential Criteria: Direct Involvement of the Image
According to case law, the services provided by the company must be considered highly personal services when:
- The contract explicitly includes the direct involvement of the artist’s or athlete’s image.
- The presence and performance of the individual is essential.
- There is no significant added value provided by the company.
This is established in, among others, the following rulings:
- Madrid High Court Ruling 69/2021 (February 10, 2021)
- Madrid High Court Ruling 42/2022 (January 26, 2022)
Properly Valuing Related-Party Transactions
It is essential that, in cases where a company holds the image rights of an artist or athlete and provides highly personal services, the following is done:
- Assess and properly value the related-party transaction between the company and the shareholder.
- Apply the market value.
- Attribute the income to the individual’s PIT, where applicable.
This analysis is crucial to avoid tax risks in an area increasingly monitored by tax authorities.
