GSLTR – Comparative Tax Appoach: Belgium, Switzerland, The Netherlands, Turkey

Continuing with our comparative tax approach of major European Leagues^[1], in which we analyzed the main tax aspects about Spain, United Kingdom, France, Italy, Portugal, and Germany, we are going to point out the main relevant tax aspects of other countries in the present article.

Indeed, we would deliberate in the cases of Belgium, Switzerland, The Netherlands and Turkey, about some key-issues that we usually analyze in the international transfer of players.

Belgium

1. Tax residencyAn individual would be considered as resident for tax purposes in Belgium if the place of his residence or domicile is in Belgium.The place of residence is the location where a taxpayer resides with the intention of living on a permanent basis. In this sense, other aspects such as the familiar, professional, economic or cultural circumstances shall be considered.Besides, the Belgium tax law include two legal presumptions where it is assumed that the place of residence is located in that country:
   • subject to proof to the contrary, the place of residence would be Belgium if the taxpayer is enrolled before the Belgium National Register of Individuals.
   • the place of residence of married or legally co-habiting individuals is irrefutably deemed to be located where the household is established.
   In case the taxpayer has Belgium as the place where his assets are managed, he may also be treated as tax resident in that country.Belgian taxpayers are subject to taxation on the worldwide income (i.e. Belgian and non-Belgian source income) even though tax treaties may be applied to avoid the double taxation.Lastly, it must be pointed out that “split year treatment” may be apply in those cases where the taxpayer taking up or concluding Belgian tax residency (in case of transfers it would be important to check the departure /arrival date in order to confirm the tax residence of the player or the tax treaty that may be applicable).
2. Payments to be received after a transferThe payments made by the Belgian club to the player after the termination of the labor agreement, would be considered as employment income and therefore taxable under Belgian tax law.Though, payments made by a foreign club before the arrival of the Player to Belgium, would not be taxable under domestic law of Belgium. But, if the payment is made by the foreign club after the arrival of the player to Belgium, in principle it would be taxable in this country (regardless the application of the corresponding mechanism to avoid the double taxation, according to the tax treaty that may be applicable).
3. Agency fees paid by the club on behalf of the playerAgency fees paid by the club on behalf of the player would be considered as a benefit in kind and the player would be subject to taxation as employment income.Simultaneously, the club would have to withhold the corresponding amounts as its consideration of salary.

Switzerland

1. Tax residencyAn individual is deemed to be tax resident in Switzerland if one of the following criteria is met:
   • the taxpayer has the domicile in Switzerland. The domicile includes two concepts: the residence and the intention to remain on a long-term basis.
   • the taxpayer is physically present in Switzerland for 30 days while performing a professional activity; or 90 days without performing any professional activity.
   The swiss tax residents are subject to taxation on a worldwide basis.
2. Payments to be received after a transferPayment made by a Switzerland club after the termination of the labor relation would be taxable in Switzerland if it is linked with his job in that country. So, the timing of the payment is not relevant.Payments made by foreign club to the player after the transfer of the domicile, would be fully taxable in Switzerland. However, it may be observed in those cases the corresponding tax treaties to assess if such payments may be only taxable in the source country under article 21 OECD Model Tax Convention.
3. Agency fees paid by the club on behalf of the playerThe payment would be considered as an employment income and taxable In Switzerland as long as the player is resident for tax purposes in that country.If the payment is made when the player is not a Swiss tax resident, then, such payment only may be taxable in Switzerland as long as it is linked to his past employment in that country.

The Netherlands

1. Tax residencyThe Netherlands tax residency criteria are based on the confirmation on certain circumstances and facts. The most important and relevant circumstances and facts are based on social an economic interest. Some examples would be the following and would help to the fact that The Netherlands considers that an individual is resident for tax purposes there:
   • If the taxpayer has a permanent home there.
   • If the player performs his employment duties in The Netherlands.
   • If the family lives with the taxpayer there.
   • If the player is registered before the competent local authorities in The Netherlands.
   • The number of assets (i.e. bank accounts, properties) and memberships held by the player in The Netherlands.
   • The social ties to the country.
   • The number of days spent in The Netherlands.
   Usually, an individual may be resident for tax purposes in The Netherlands if it is the country with which he has the most ties. Generally speaking, the Netherlands allow that the player ends his period as tax resident there when he leaves the country on a permanent basis, that is to say, for example, on the date of transfer.Residents are taxed on his worldwide income, and non-residents only on his Dutch-source income. There is a special tax regime, known as the “30 % rule”, that is a tax advantage for highly skilled migrants moving to the Netherlands for a specific employment role. If the necessary conditions are met, the employer can grant a tax free allowance equivalent to 30% of the gross salary subject to Dutch payroll tax. In order to benefit from this, football players must fulfill certain requirements about his salary and expertise.
2. Payments to be received after a transferIt is not important if the payment is performed before or after the termination of the residency in The Netherlands, the important issue is the amount to be paid. The income should be characterized as employment income, but if the amount of the payment exceeds certain limits, it may exist an additional tax burden.If a player is entitled to receive a certain percentage of the transfer amount, two issues should be considered:
   • If he effectively perceives that amount, it may face to the excessive termination payment tax.
   • If he waives his right to perceive that amount, the player may face to some tax problems. The tax authorities would consider that the player has earned the referred amount, and lately, he has paid it back to the former club. This may challenge some problems if the deduction of the payment made to his former club is not allowed, because the supposed perception of that income may be taxable on player´s personal income tax return.
3. Agency fees paid by the club on behalf of the playerRegarding the agency fees, it does not seem that Dutch tax authorities have adopted the consideration that it has, for example in Spain. Therefore, and for the moment, no tax implications may derive from the payment of agency fees from a club on behalf of the player in The Netherlands.

Turkey

1. Tax residencyxAn individual who is resident for tax purposes in Turkey are taxed on his worldwide income. However, non-residents for tax purposes in Turkey are taxed on his Turkish source income.In order to be able to determine the tax residency in Turkey, it is important having a domicile in Turkey. If somebody has a habitual abode and live in Turkey for more than six months on a calendar year are considered to have a domicile in Turkey.
2. Special Tax regimeThe main tax aspect to be currently taken into account in Turkey is the special regime for salaried professional sportspeople. Ordinary taxpayers in Turkey pay taxes on a progressive basis ranging from 15% to 35%. However, a special provision was added on 2008 to the Turkish Tax regulations for salaried professional sportspeople. For sport branches which belong to a league, the taxation would be as it follows:
   • Top League players: 15%.
   • League below the Top League: 10%.
   • Other leagues: 5%.
   Therefore, players who play for the Turkish Superleague would pay tax rates at a rate of 15%.This regime is planned to be in force until, at least, December 31, 2019, and it has been established in order to boost the quality of Turkish League. It involves a strong competitive advantage for attracting players to Turkey.

CONCLUSIONS

Today more than ever, tax aspects are essential in the international transfers. If we are in front of an international transaction, it is unthinkable to avoid the analysis of the tax burdens and tax implications that may take place.

Aspects such as tax residency and its controversy (i.e., according to the domestic law, application of the tax treaties or the eventual split tax years), agency fees, image rights income or payments after the transfer, may have an essential importance not only in the taxes to be paid but also a key-point to accomplish an accurate view of the negotiation over the deal between parties.

The increase of the international issues because of the globalization in the football market has entitled the pressing responsibility of evaluate deeply the tax consequences, since those may change considerably the figures of the transaction.

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[1] Global Sport Law & Taxation Reports, Journal 9-2, June 2018.