Football is notably the most popular sport in the world, with billions of TV viewership and fans all across the globe. When it comes to football, Spain is one of the top leagues in the world.

Spain’s premier league is called La Liga, and the TV rights for this league are massive worldwide. When a football league has TV rights to almost all parts of the world, it is common sense that there will be sponsors pouring in to advertise themselves through these football clubs and leagues.

The money generated from all these deals attracts the best players from across the world, and these players are paid huge sums of money as salary. Along with the salary, they also get lots of individual sponsorship deals.

The popularity of La Liga helps Spain’s economy grow. Therefore, Spain develops strategies to introduce attractive tax laws to promote the arrival of foreign players.

In this article, we will discuss the primary tax laws in Spain and how it deals with different tax issues concerning football players.

Spain’s Tax Rates On Footballers

The tax system in Spain is devised in such a way that sportspersons may benefit from it. The transfer of a player from a foreign club to a club in Spain can cause various financial streams with specific tax ramifications.

If a Spain permanent resident is employed as a player in one of the clubs in La Liga, they are supposed to pay taxes on their worldwide income. This means that the Spain resident is obligated to pay a certain percentage of his overall income, including salary, sponsorship deals, advertisements, etc.

The tax rates for permanent residents can vary from 43% to 52% based on the different regional policies in Spain, but for a non-resident, the tax rates will be around 19% to 24%. The non-residents are only obligated to pay taxes on the income they receive from Spanish employers, which, in this case, is their football clubs.

Non-permanent residents also pay tax rates on their properties or businesses located in Spain. Some forms of income may incur lower tax rates according to different Spanish regulations.

Taxation On Termination Of Contract

If the football club terminates a player’s contract, the club is obligated to pay the rest of the remaining salary on the player’s remaining contract. In such a case, the STA will only impose tax rates on the pay-off money as income tax.

The tax rates will be the same as the income tax of 43% to 52%, assuming that the player is a resident of Spain. This tax payment can be made at any point before or after the contract termination, as the player remains a resident for tax purposes in Spain for the whole economic calendar year.

Tax Obligations When A Player Transfers To Another Club In An European Country

When a club in Spain terminates a player’s contract, and moves to a football club in another European country (League), the payment made by the Spanish club to the player will come under tight scrutiny from both countries’ tax laws.

Everything here depends on the tax treaty between Spain and the player’s new country of employment. If the treaty between the two countries suggests that the player should pay the tax in Spain, the player’s income tax will go to Spain. If not, then the authorities should consider the tax laws of the player’s new country.

If the player opts not to apply for tax residence in the new country, the income tax will be solely payable to Spain.

Tax On Single-Time Payments

When a player is bought from a club, the selling club sometimes adds clauses in the contract where the buying club has to pay a small percentage from any future sales.

In this case, there are a couple of outcomes.

·        If the player is still a resident for tax purposes in Spain for the calendar year, the income will be taxed in Spain according to the standard 43% to 52%.

·        If the player is a non-resident for tax purposes in Spain in the year where the payment is claimable, the STA can only levy tax on income incurred from a Spanish source or if there is a tax treaty agreement between Spain and the other country.

Tax On Agent Fees In Spain

Every player is represented by an agent that reaches out to football clubs. The agent looks over the financial dealings of the player, and in return, the agent is paid a certain percentage by the buying club.

If the agent is a resident in a treaty jurisdiction, they are usually not liable to the income tax laws. However, if the agent is part of a company or a group established in Spain that deals with player transfers, the OECD Model grants Spain the right to tax the player.

For a non-resident in a treaty jurisdiction, an agent is subject to taxation if the services are used in Spanish jurisdiction. This means that any financial dealings carried out by an agent under Spanish territory are part of Spain’s economic activity.

So, the agent’s fee will be taxed in relation to their salaries, provisions, and supplies. The tax rate for the agent’s fee reads 24% in accordance with the non-resident Spanish tax law.

Tax On Agent Fees Paid By The Football Club

If the football club is the one that pays the agent, the income will be considered to be sourced through a Spanish company. Here, the football club will take the role of a company based in Spain.

In such a case, the agent’s fee will be taxed according to the resident Spanish tax law. The tax rate will be the same for Spanish resident income tax, from 43.5% to 52%.

Any payment that is sourced from a company or an institution that is located in Spanish territory will be levied the standard income tax as the Spain residents. The tax on the agent’s fee will be determined by whether the club or the player is paying.