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Russia Passes Special 2018 FIFA World Cup Tax Regulations

The 2018 FIFA World Cup is a soccer spectacle showcasing the prowess of athletes from 32 nations on one of the world’s grandest sporting stages. More than 1.5 million tourists from around the world are expected to travel to Russia between the opening match on June 14, 2018, through the final match on July 15, 2018, to watch these nations compete to be crowned World Champion.

The influx of tourism will surely boost the Russian economy, as visitors are expected to spend more than $1.6 billion, according to the Financial Tribune. However, Russia has also taken steps to enact special World Cup tax provisions designed to ease the tax-filing requirements of visitors and participants during the month-long festival of soccer. These were signed into law several years after Russia was awarded the right to host the World Cup (the rights were awarded in December 2010).

The first sign of special provisions began on June 8, 2013, when Russian President Vladimir Putin signed new federal laws directly related to the organization of the 2018 World Cup. The newly signed laws provide the full framework related to visas, migration control, security, trade and sales activity, customs regulations, urban development and the tax code during the World Cup.

The special tax code provisions specify that members of FIFA’s governing body, employees of FIFA World Cup official sponsors and affiliates, referees, soccer players, coaches and members of soccer delegations are not subject to taxation on compensation and prizes earned during the month-long tournament.

FIFA published a total prize money list in which it allocates funds to each participating nation based on its final tournament position. The 2018 prize payouts have increased by 13% to $400 million; however, the special tax code amendments ensure that all of the $400 million in prize money awarded to federations is excluded from taxation in Russia. The Russian corporate tax rate varies from 15.5% to 20%, meaning that Russia will lose approximately $80 million dollars of income taxes.

In addition to the FIFA prize money, each participating federation has a collective bargaining agreement with its players, awarding them bonus money based on the team’s final tournament ranking. For example, Goal.com reports that if the English national team wins the World Cup, its 23 players will split a bonus of £5 Million. This £217,500 bonus will be paid to each athlete, in addition to their player salaries, per-diems and stipends for participating in the tournament. The income each athlete may potentially receive as a bonus will be exempted from taxation in Russia based on the tax code changes enacted by Russia for the World Cup. These bonus earnings may be taxed in the country each player considers their tax residency or citizenship.  Some countries, such as the United States, have a worldwide income reporting mandate for all of its citizens.

Despite the clear economic benefits associated with attracting tourism to their countries, some nations (such as Norway who pulled their 2022 Olympic Winter Games hosting bid in 2014) are becoming wearier of making bids to host global sporting events because the economic windfall – especially in light of tax provisions such as what Russia enacted – may not have as positive an impact.

 

Related Content:
The Economics of Sports: The 2018 FIFA World Cup
Russia Passes Special 2018 FIFA World Cup Tax Regulations
Taxation of Athletes Participating in the 2018 FIFA World Cup
7 Ways the World Cup May Impact Major League Soccer

Vincent Treglia is a Senior Tax Manager in the Personal Wealth Advisory practice and is a member of its International Wealth Advisory group. Vincent has held a diversified tax capacity role before specializing in international tax.

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