Taxes applicable to athletes, clubs, federations and other sports entities

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Taxation of sports

In the dynamic and complex world of sports, taxation plays a fundamental role that affects athletes, clubs, federations and various related entities. The interaction between tax law and the sports field presents unique challenges, which require a deep knowledge of both sports law and current tax regulations. In this article, we will explore the main taxes that impact this sector in Spain and how they affect its various stakeholders.

Personal Income Taxes (IRPF)

One of the main taxes that impact sportsmen and women is the Personal Income Tax (IRPF). The income earned by sportsmen and women, whether salaries, performance bonuses, sponsorship contracts or image rights, are subject to this tax. The complexity lies in the fact that this income can come from multiple sources and in different jurisdictions, which complicates its declaration and liquidation.

For elite athletes, who usually have high incomes, the tax rate can reach 47% on the state scale. In addition, it is essential to consider the double taxation agreements that Spain has with other countries to avoid double taxation on income generated abroad.

Corporate income tax

Sports clubs and federations, like any other business entity, are subject to corporate income tax. This tax is levied on the profits obtained by these entities and its general rate is 25%. However, the tax reality of these organizations can be very diverse, since many clubs are structured as sports corporations (SAD) and may benefit from certain tax incentives.

For example, investments in sports infrastructure may be subject to tax deductions. In addition, sports federations, being non-profit entities, have a special tax regime that may reduce their tax burden, provided they comply with legal requirements and use their income for sporting purposes.

VAT in sports

Value Added Tax (VAT) also has a significant relevance in the sports sector. Tickets to sporting events, the sale of merchandising, personal training services and the use of sports facilities are subject to this tax. Generally, the applicable tax rate is 21%, although there are exceptions.

For example, physical education and sports activities carried out by non-profit entities may be exempt from VAT, provided that they meet certain requirements established in the regulations. Also, services provided by sports federations to their members may benefit from a VAT exemption, contributing to the accessibility and promotion of sports.

Withholdings and payments on account

In addition to direct and indirect taxes, withholdings and payments on account are an integral part of sports taxation. Sports clubs that pay salaries to their players and employees must make withholdings on account of income tax and corporate income tax. These withholdings are calculated based on the income and personal situation of the athlete or employee.

Likewise, sports entities must make installment payments of corporate income tax throughout the fiscal year. These advance payments help to spread the tax burden and avoid surprises at the time of the annual settlement.

International taxation and double taxation agreements

The globalization of professional sports means that many athletes and clubs have interests in several countries, which adds an additional layer of tax complexity. Double taxation treaties play a crucial role in this context, as they allow sportsmen and sports entities to avoid double taxation on the same income.

Spain has signed numerous agreements of this type with different countries, which establish criteria for determining tax residency and the right to tax certain types of income. For example, income earned by athletes in international competitions may be exempt in Spain if it has already been taxed in the country of origin, depending on the specific terms of the applicable agreement.

Conclusion

Sports taxation in Spain is a complex area that requires specialized attention and in-depth knowledge of tax and sports regulations. Athletes, clubs, federations and other entities must navigate an intricate tax framework that includes income tax, corporate tax, VAT and international considerations. Proper advice and effective tax planning are essential to ensure compliance with legislation and optimize the tax burden in a dynamic and competitive industry such as sports.