Tax laws

Tax laws for non-resident professional athletes – Taxation


INTRODUCTION

High performance athletes who participate in various sports earn millions of dollars in salaries. Just like a normal employee, they have the right to pay their contributions to the government. Earning extraordinary salaries also results in extraordinary tax payments. Cristiano Ronaldo – a top athlete has decided to join Juventus FC, one of the main Italian football clubs. Ronaldo signed a four-year contract with Juventus, earning a net annual salary of about? 30 million ($ 35 million), which means, based on current Italian marginal tax rates, a gross salary of? 55 million ($ 64 million). In this regard, recent changes in Italian tax legislation have influenced the relocation of many athletes to Italy.

ITALY

The Italian budget law of 2017 introduced an important tax incentive scheme for high net worth individuals wishing to settle in Italy. With the introduction of a new article in the Italian income tax law, article 24-bis, some “new residents” taxpayers who settle in Italy can opt for a? 100,000 flat-rate taxes on their income from foreign sources.

The new Italian tax system is particularly attractive for professional athletes. Professional footballers who have signed a sports performance contract with an Italian football club are considered employees of the football club and, therefore, income from its services is considered subordinate employment income. If the service is performed in Italy, the income is taxed in Italy. Therefore, it is considered income from Italy and is taxed at the ordinary Italian tax rate, which is excluded from? 100,000 flat-rate taxes. If an athlete’s image rights are not dealt with under the employment contract, income attributable to the exploitation of image rights may be classified as “other income” under national tax rules. Italian. If this income is linked to assets located abroad or to activities carried out outside Italy, this income will be considered as foreign income. For example, payment from a soccer player received from an American sportswear company for a sponsored event in China that has nothing to do with the soccer player’s performance in the soccer team may be considered as income from a non-Italian source. Alternatively, if the athlete’s image rights have been assigned to a non-Italian image rights company, the dividends paid by the company (i.e. the image rights company that manages the image rights image rights of the athlete) can be considered as income from a non-Italian source by the foreign entity, in the absence of a finding of abuse. Some athletes who appear to be affected by tax cuts (like 50% of non-taxable income) may claim 70% non-tax recognition. At other times, it is necessary to understand the true nature of the income that professional athletes receive or other specific elements of the case to confirm the applicability of the tax benefit in question.

ENGLAND

From a tax perspective, the UK also offers a preferential tax regime for residents who are not domiciled in the UK: the Homeless Residents System (“British RND”). Under the UK RND system, taxpayers requiring a tax ‘payout base’ are only required to pay UK tax when paying income and capital gains outside the UK. Foreign income and unpaid earnings in the UK are not taxable in the UK. If a taxpayer has at least 15 UK tax residents in the last 20 UK tax years, they will be deemed to have moved to the UK for all tax purposes from the 16th tax year in which they lived in the UK -United. United Kingdom: means a tax on foreign income and gains based on production (not just when such foreign income and gains are remitted to the UK), and a 40% UK inheritance tax on assets worldwide that exceed the £ 325,000 threshold (subject to certain spousal or charitable disposition exemptions).

Perhaps the most significant difference between the British and Italian systems is the complexity of the tax base. For taxpayers with offshore accounts or investment structures, the rules regarding remittances can be onerous to administer. Unlike the UK, Italy does not require taxpayers to perform special accounting treatments or report foreign source income or income transferred to Italy.

SPAIN

Like England, the Spanish League also has a reputation for being a very entertaining football league. From a tax point of view, Spain also offers preferential tax incentives to new taxpayers who transfer their tax residence to Spain. In fact, according to the so-called Beckham law, new employees who have not been tax residents in Spain for the past 10 years can benefit from preferential taxation for the first six years if they move to Spain as part of a ‘an employment contract with a Spaniard. employer. The treatment lived in Spain for many years. More precisely, the maximum marginal tax rate on dividends, interest and capital gains is 23% (if it is greater than 50,000 euros), while the tax rate on labor income is 24 %, within the limit of 600,000 euros, and the excess tax rate is 45%.

INDIA

Section 115BBA deals with income earned by non-resident athletes from participating in a game (except winning a game subject to 115BB tax), advertising or contributing items related to a game or a sport in India. Income will be taxed at the rate of 20%.

In accordance with Section 194E of the Income Tax Act, TDS on payments to non-resident athletes must be deducted @ [20% + surcharge if
applicable + health and education cess of 4%] at the time of credit or payment, whichever occurs first. Non-resident athletes can avoid double taxation under a double taxation treaty. Non-resident athletes normally live outside India but earn income in India. In this case, income earned in India may be taxed in India and in your country of residence. This means that they have to pay taxes twice on the same income. To avoid this, the Double Taxation Avoidance Agreement (DTAA) was introduced.

According to Article 18 of the said convention, the income derived by a resident of the United States as an athlete, may be taxed in India, if the amount of the net income derived by that artist or athlete from such activities (after deduction of all costs incurred by him in connection with his visit and representation) exceeds $ 1,500 or its equivalent in Indian rupees for the tax year concerned. If the income exceeds $ 1,500, the full amount will be taxable in the country of enforcement.

Tax laws for non-resident professional athletes

Originally posted Aug 20, 2021

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.