Spain's Tax Rate On Football Player Salaries and Famous Tax Evasion Cases
Spain has one of the highest tax rates in Europe where tax resident with higher income pays as much as 45% to 50% tax on their worldwide income. Spain's government together with Spanish FA has worked together to make it more appealing for foreign players to join Spanish clubs but the schemes they have introduced have not worked as well as they would have thought. High tax rates in Spain has caused many footballers and managers to get caught in Tax Evasion cases notably Messi, Ronaldo, Jose Mourinho, Carlo Ancolotti and many others. We breakdown what is actually causing this.
What is the Current Tax Rate On Footballers In Spain ?
Non-Tax Resident: According to current law foreign footballers who are tax residents in Spain pay as much as 52% tax on their yearly income. For non-tax resident sportsperson, tax is around 24% on income derived from Spanish company/work. If non-tax resident sportsperson is from EU/EFA he is only taxed at 19%.
Tax Resident: A sportsperson is considered tax resident if he has spent last 6 months in Spain. If he earns over €60,000 a year he is placed in highest tax bracket of 24% tax which is state-wide. There is also regional tax which is at different rates in different parts of spain. Madrid region has the lowest regional tax at 20.5% making players playing for Real Madrid, Atletico Madrid etc paying a total of 45% tax on their income. Valencia and Levante has higher regional tax rates at 30% making footballers in this regional paying as much as 54% tax on their income.
Footballers excluded from Beckam's Law In 2015:
In 2004 a new law was introduced where a person coming to spain for certain employment or bussiness was taxed at 24% of his/her worldwide income. This law was dubbed “Beckham’s Law” after his arrival in Spain from Manchester United. However in 2015 professional footballers were excluded from this scheme causing big shift in tax evasion cases for both plahyers in managers. This led to football professionals turning to off-shore company/accounts believing their off-shore income will not be discoverable by Spanish tax authorities. This scheme made a big scene not only in Spain but worldwide. Many footballers during 2009 to 2015 period tried to get advantage of confusion in law and hid their income in off-shore accounts. That is one of the reason footballers were excluded from Beckams Law and since 2015 they now have to pay 50% tax on their worldwide income rather then only 24%.
Notable Tax Evasion Cases:
There have been number of high profile cases on footballers about tax evasion. The most prominant ones were on Lionel Messi which actually become one of the reason of him leaving the country. Cristiano Ronaldo also had to deal with Tax authorities while managers are not spared either. Jose Mourinho and Carlo Ancolotti both are accused of tax evasion. Spanish national footballer and new Real Madrid manager Xabi Alono was also accused of Tax evasion but unlike others he fought the case against prosecution and won.
1. Lionel Messi might be the best player during his time in Spain but not the best Tax Payer:
Lionel Mess and his father Jorge were found guilty of defrauding spanish tax authorities of €4.1 million during 2007 and 2009 he was sentensed to 15-months suspended prison sentenced. But he agreed to pay fine of €400 per day making it €252,000. His father sentenced was turned into €150,000 euro fine. However apart from Sentence they made around €6 million corrective payment which included unpaid tax and interest. They were accused of concealing Messi's image rights income at off-shore company accounts in Belize and Uruguay.
2. Cristiano Ronaldo:
Cristiano Ronaldo had to pay massive €18.8 million tax evasion charges during his time in Spain. He was also sentenced to 23-months jail-term but in Spain non-violent sentence under 2 years are usually suspended and no jail term is needed
