The contract states that in the event of non-compliance with any of the established provisions, the defaulting party shall be liable to a compensation payment of $50 million G€. Under this agreement, the subscription of an employment contract between PFC and Reymar Jr. prior to July, 2017 (date in which the player acquires the condition of free agent) will be deemed as a failure to comply within the terms of the arrangement. On July 15th, 2015 PFC paid R&R Imagemanaging the first $10 million G€, without withholding of any kind.
Through the summer of 2015, several clubs from TORERONIA came to know about the terms of the contract between R&R Imagemanaging and PFC. Under those circumstances such clubs offered Reymar Sr. better working conditions for his son and even higher payments, if R&R Imagemanaging agrees to Reymar Jr. joining their respective teams.
Those conversations came to the attention of PFC’s representatives who once again contacted R&R Imagemanaging in order to anticipate the transfer. As a result of several meetings, on May 30th, 2016 MFC (entitled to the player’s federative rights until July of 2017), PFC, Reymar Jr. and Reymar Sr. signed a contract concerning the transfer of the player’s federative rights to PFC. As a consideration for the transfer of Reymar Jr., PFC remunerated MFC with $20 million G€, without withholding of any kind.
On June 5th, 2016 PFC and R&R Imagemanaging declared the termination of the contract signed on June 30th, 2015. Under those circumstances, PFC satisfied its obligation to pay the agreed compensation of $50 million G€. The payment terms of such compensation were renegotiated. By 2015 $10 million G€ were already paid. The remaining $40 million G€ should be paid as follows: (i) $35 million G€ on September 12th, 2016 and (ii) the remaining $5 million G€ on January 20th 2017. PFC met its commitments on time, without
withholding of any kind.
As a result of the previous arrangement PFC, Reymar Jr. and Reymar Sr. – acting as his son’s manager – entered into an employment contract that bound the player to the Sports Club until June 8th, 2021. The working conditions agreed in the contract signed June 30th remained in place, those conditions were: (i) $5.5 million G€ per season in wages and (ii) $1 additional million G€ if he achieved a number of objectives.
Consequently, on August 15th, 2016 Reymar Jr. moved to Polakcity in TORERONIA, where the club is located. However, under TORERONIA’s domestic tax law Reymar Jr. is not considered a resident in said country until January 1st, 2017.
Furthermore, on June 8th, 2016, PFC, R&R Imagemanaging and Reymar Jr. signed the transfer of his image rights. Under this contract, R&R Imagemanaging yielded the player’s collective image rights and individual image rights (related to his status as a PFC player), to the latter entity. Through this new agreement, PFC undertook to pay R&R Imagemanaging the following amounts: (i) $1 million G€ on September 1st, 2016 and (ii) $800,000 G€ per season while the contract was in force.
On September 1st, 2016 PFC performed the payment for the transfer of Reymar Jr.’s image rights, without withholding of any kind. The company considered that the transaction gave rise to business profits or royalties, according to the Double Taxation Convention (DTC) in force between TORERONIA and INMATERIALONIA.
Finally, on June 8th, 2016 PFC and R&R Imagemanaging signed a scouting agreement, under which R&R Imagemanaging committed to render services regarding sports and technical monitoring of amateur players from different non-professional leagues located in CARIOCONIA, with the purpose of advising PFC in future recruitments and acquisition of preferential rights to such players. In the corresponding contract the parties agreed to an annual payment of $500,000 G€ for the provision of such services, throughout five subsequent years. On December 1st, 2016, PFC paid the first $500,000 G€ without deducting withholding tax, under the assumption that such payment constituted business profits under the DTC between TORERONIA and CARIOCONIA.