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Taxation of Athletes Participating in the 2018 FIFA World Cup

As the tournament progresses and we get closer to crowning a champion, the entire world is tuning in as each person cheers on their favorite of the remaining teams.  Despite the absence of the U.S. Men’s National Team in the 2018 FIFA World Cup in Russia, the United States Major League Soccer had 19 players representing six countries.1

So what does all this amount to in tax dollars to U.S.-based players and their counterparts on other national team squads? With respect to Russia, it means zero tax. As Vincent Treglia mentioned in his earlier post, FIFA itself and national football associations of the countries participating in the World Cup are exempt from taxes in Russia, including compensation and prize money paid to Russian non-resident soccer players and members of soccer delegations. After the World Cup is over, FIFA distributes the prize money directly to national associations outside of Russia so the question now becomes whether that prize money is subject to Russian tax laws or whether it should be sourced to each country of the respective national football association.2

U.S. citizens and residents must report their worldwide income, which would include any compensation and prize money generated by participating players or anyone involved or engaged to work in the event who are U.S. citizens, hold green cards or meet the substantial presence test (“SPT”).  Also most other players will not escape taxation, because they will be paying taxes in their home country as well, which taxes residents on their worldwide income unless you’re a player from a country on a territorial tax system (Costa Rica or Panama), which only taxes residents on their local-source income but not foreign-source income.

So what happens when a U.S- based player travels to the country they represent in the World Cup for practice days, appearances or other tournaments? In theory, any country could tax an athlete competing within its borders whether it be for a tournament or practice days for the corresponding national team. Double taxation is eliminated through foreign tax credits and/or tax treaty exemptions on country-sourced income of non-residents, where residents or citizens of the United States are taxed at a reduced rate, or are exempt from foreign taxes, on certain items of income they receive from sources within foreign countries.3  The foreign tax credits result in a reduction of U.S. income tax by the amount of the foreign income tax paid to the foreign government, assuming there is a diplomatic relation.

Below is a table illustrating some of the participating countries with a summary of the highest tax rates for residents and non-residents within each respective country. The issues are very complex for professional athletes when they play abroad and should be carefully examined. Regardless of which team you’re rooting for, Russia seems to have the most favorable tax regime for its resident athletes.

 

  COUNTRY RESIDENT TAX RATES ON PERSONAL INCOME

NON-RESIDENT TAX RATES ON PERSONAL INCOME

GROUP A

RUSSIA (treaty)

 

13% tax rate on income except for 35% tax rate on interest and awards/prizes

13% tax rate on income of highly qualified foreign professionals (HQSs) otherwise 30% tax rate for all types of income except 15% on dividends (HQSs is a foreign national with work experience, skills, or accomplishments in a specified field who is employed in Russia at a monthly salary of at least 167,000 RUB (2,614 USD) (with certain exceptions))
 

EGYPT (treaty)

22.5% tax rate on income over 200,000 EGP (11,200 USD) with no foreign tax credit 22.5% tax rate on income over 200,000 EGP (11,200 USD)
GROUP B 

PORTUGAL (treaty)

48% tax rate on income over 80,640 PTE (93,300 USD) (not including 3.21% extraordinary surtax and an additional solidarity rate, which varies between 2.5% and 5%) 25% tax rate
GROUP C

PERU

30% tax rate on income over 182,250 PEN (55,600 USD) and 5% tax on capital gains and rentals

30% tax rate
GROUP D

ICELAND (treaty)

46.24% tax rate on monthly income over 893,713 ISK (8,290 USD) with 36.94% tax rate on the first 893,713 ISK (8,290 USD)

46.24% tax rate on monthly income over 893,713 ISK (8,290 USD) with 36.94% tax rate on the first 893,713 ISK (8,290 USD)

 

ARGENTINA

35% tax rate on income over 412,064 ARS (14,860 USD) in addition to 91,942 ARS (3,316 USD)

35% tax rate on income over 412,064 ARS (14,860 USD) in addition to 91,942 ARS (3,316 USD)
GROUP E

BRAZIL

27.5% tax rate on monthly income over 4,664.68 BRL (USD)

25% flat tax rate with 15% tax rate on rentals

GROUP F

GERMANY (treaty)

45% tax rate on income over 260,533 EUR (301,520 USD) for single taxpayer with 5.5% solidarity surcharge

45% tax rate on income over 260,533 EUR (301,520 USD) for single taxpayer with 5.5% solidarity surcharge

 

MEXICO (treaty)

35% tax rate on income over 3,498,600 MXN (171,800 USD) in addition to 1,097,220 MXN (53,879 USD)

30% tax rate on income over 1,000,000 MXN (49,104 USD) and over

GROUP G

ENGLAND (treaty with United Kingdom*)

45% tax rate on income over 150,000 GBP (198,575 USD) in addition to 53,100 GBP (70,300 USD) in the UK excluding Scotland

46% tax rate on income over 150,000 GBP (198,575 USD) in addition to 55,062 GBP (72,893 USD) in Scotland

45% tax rate on income over 150,000 GBP (198,575 USD) in addition to 53,100 GBP (70,300 USD) in the UK excluding Scotland

46% tax rate on income over 150,000 GBP (198,575 USD) in addition to 55,062 GBP (72,893 USD) in Scotland

GROUP H

COLOMBIA

33% tax rate on labor income over 135,939,600 COP (46,900 USD) in addition to 26,126,928 COP (9,014 USD)

35% tax rate

*At this time the United Kingdom does not have a national soccer team.  The four nations which make up the United Kingdom (England, Wales, Scotland, and Northern Ireland) compete as independent sovereign nations for international soccer competitions; however, they share the policies of the associated income tax treaty which the United Kingdom has with the United States.


[1] MLS players named to 2018 FIFA World Cup squads, https://www.mlssoccer.com/post/2018/06/04/mls-players-named-2018-fifa-world-cup-squads

[2] Valeriy Fedoreev, Partner with CMS Russia, personal communication, June 21, 2018

[3] U.S. Department of the Treasury, Internal Revenue Service. United States Income Tax Treaties – A to Z

 

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

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