Spain gives soccer icons the red card

Your Guide to State, Local, Federal, Estate + International Taxation

“To me, soccer is so much more than a ball and two goals; it connects people from all of the corners of the world.”  – Unknown Author

soccer, tax, Spain, tax fraud, tax evasion, evading taxThe Spanish government is helping connect (and prosecute) players from all corners of the world that are linked to similar, serious tax evasion issues. Over the past several years, many soccer players and coaches have been facing accounts of tax fraud. The following is a list of a handful of those men, where they are from and where they play now:

  • Lionel Messi – born in Argentina, plays for FC Barcelona
  • Cristiano Ronaldo – born in Portugal, plays for Real Madrid
  • Jose Mourinho – born in Portugal, coaches for Manchester United
  • Ricardo Carvalho – born in Portugal, plays for Portugal
  • Xabi Alonso – born in Spain, plays for Real Madrid
  • Angel Di Maria – born in Argentina, plays for Paris St. Germain
  • Radamel Falcao – born in Columbia, plays for AS Monaco FC
  • Javier Mascherano – born in Argentina, plays for FC Barcelona

All of these players are/have been accused of tax fraud for not reporting income from worldwide image rights while playing for Real Madrid between the years of 2010 – 2014.

The latest soccer icon to take a hit is Jose Mourinho, coach of Manchester United. It is alleged that he defrauded Spain of $3.7 million. Although, another article stated that his tax affairs have been ratified, and he “has not received any notification” from the Spanish tax authorities. This comes not more than a week after Cristiano Ronaldo (Real Madrid) was accused of withholding $16.5 million in taxes from the Spanish government.

Right now, you are probably either wondering why the Spanish government is being so greedy and harsh or why all these soccer icons appear to be so corrupt. It all comes down to the economy and past soccer legend David Beckham. Back in 2005, David Beckham was one of the first people to take advantage of a Spanish tax decree that helped out foreigners. The decree stated that foreigners could sign up for a tax ceiling of 24% in the first six years of employment in Spain. This is nearly half of what the wealthiest Spaniards pay. The tax program also allowed income earned outside of the country to qualify for tax avoidance. This is where the soccer stars got away with not paying Spain taxes on their image rights. Things were going well and then BAM! The global recession hit in 2008 and like most countries, Spain started to struggle. This led to a 2010 law alteration that limits those able to take advantage of this tax help to earnings of 600,000 Euros per year and has tax authorities scrutinizing wealthy foreigners’ taxes.

Many of the soccer stars have left their image rights to be managed by companies that have been set up in other countries. Whether there is just confusion since the law has been changed or they are purposely trying to evade their tax liability is unclear. Although, those that set up companies in The British Virgin Islands are looking pretty guilty – just saying.

The moral of this story:  Make sure that you consult your tax professional because laws in the tax world are always changing.

Joanna M. Yergler, CPA