Taxation for Athletes: Lionel Messi, Image Rights & Agent Fees
Imagine you are Lionel Messi’s tax advisor. What would your advise be?
Taxlinked (TL): Imagine you are Lionel Messi’s tax advisor. What would have been your top two tax tips to him once he burst into the scene more then a decade ago?
Patrice van Oostaijen (PvO): I would study the tax treaty between Spain and Argentina – assuming that Lionel will some day return to be a resident of Argentina – and look at options that would create high rate tax deduction in Spain now and lower rate taxation in Argentina later, like certain pensions, insurances or investments.
In answering this question, I am allowed a bit of Retrospective Force, so I know that the Spanish tax authorities since 2012 have been very aggressive in taxing players on image rights income, agent and family fees and residency issues. I would have concluded rulings in advance with the tax authorities on these matters in order to ensure peace of mind for Lionel.
TL: In general, how does helping a professional athlete with international tax planning differ from helping someone in any other industry?
PvO: There are a couple of elements that make advising players and athletes special. First of all, they are young people whose world is miles away from tax, law and finance. So that provides a larger responsibility and requires a higher service level from us as advisors, plus the ability to translate complex issues into very simple language. Next and more technical, athletes have their own article 17 regime in tax treaties and often tripartite income issues: a player living in Germany with an employment relation to the Dutch Football Association receiving match bonuses and endorsement premiums for a tournament in Spain – we have to be sharp on zero tax advantages, double tax risks and pro rata possibilities. And for autonomous athletes we always check whether we should accept the withholding tax on foreign income as it is, or to file income tax returns in those other countries and reduce the tax amount.
TL: What’s the wisest way of dealing with a famous person’s image rights and the associated tax implications? Any suggestions?
PvO: If that person is interested in image rights tax structuring, we first look at a number of actual facts and circumstances: what are the current and upcoming countries of residence, what is the expected type of image rights income, and which other persons and companies play a role in that person’s business. In that way, the structure will follow the facts in a logical way. Then, we build the contracts and structure according to the most acceptable ways for the countries involved, preferably using EU-companies. And we inform the person thoroughly in advance that a 0% tax-structure is hardly possible anymore in most jurisdictions. Another wise way to deal with a famous person’s image rights may be to do nothing with them at all – some clients prefer simplicity and a stress-free life to tax savings.
TL: What are some of the primary advantages of setting up a company in the Netherlands? Are there any drawbacks companies should keep in mind?
PvO: A Dutch BV company can be set up in a day with as less as €0,01 share capital. Corporate income tax is competitive at 20%-25%, and the income tax burden for immigrating expats may cap at 37% because of our so-called 30%-ruling. In corporate structuring, a Dutch entity will enjoy the advantages of the broad Dutch tax treaty network (zero or low withholding tax on incoming and outgoing dividend/interest/royalties). Plus: The Netherlands are a wonderful country to live and work, all infrastructures are highly efficient and Amsterdam is surely the pearl of Europe. Some foreign companies consider the high protection level of employees in The Netherlands disproportional – that could be seen as a drawback, although that protection level has dropped somewhat in the past years.
TL: Anything else you would like to share with our community on these or any other subjects?
PvO: The current hot tax issue in European football is the various tax authorities’ attitude towards agent fees paid by clubs: should they be – wholly or partially – qualified as a salary benefit in kind for the player and, if so, who should bear the tax burden. Is the outcome different if the agent truly works for the club and how can this be sufficiently documented? It’s a topic which, of course, is not welcomed by the stakeholders in football, but which presents food for thought for the coming years.