Taxation of sports: players, teams and beyond

Vittoria Di Gioacchino
BLP, San Jose
vdigioacchino@blplegal.com

Report on a session at the 17th IBA/ABA US and Latin America Tax Practice Trends Conference in Miami

Thursday 19 June 2025

Session Co-Chairs
Roberto Duque-Estrada Brigagão Duque-Estrada, Rio de Janeiro
Rachel Kleinberg Sidley Austin, Palo Alto

Speakers
Jack Bernstein Aird & Berlis, Toronto
Fabian Birnbaum FBM Advisory, Montevideo
Bianca Rothschild Martinelli, Rio de Janeiro
Alejandro Torres Von Wobeser & Sierra, Mexico City

Introduction

In light of the FIFA Club World Cup taking place in the United States at the time of this conference, a number of interesting issues, such as the tax treatment applicable to a player’s image rights, FIFA’s tax regime when a World Cup is held in any given country and other tax matters related to specific court cases involving players were discussed. The panel also analysed the preferred option for the organisation of sports entities, as well as how the proposed changes included in the reform being discussed in the US could impact the taxation of sports.

Panel discussion

Image rights

Image rights usually result in an significant amount of income for players, regardless of the sport they practise. In this first part of the panel the speakers discussed court cases regarding image rights for football players Neymar and Lionel Messi, and golfer Sergio Garcia.

First, it was established what should be considered an ‘image right’, which is defined as ‘a physical representation of a person but also more broadly to everything that makes this person identifiable’, which would include pictures, features, their name, voice and signature, amongst other things. It was explained that, because it is an attribute of the individual, it can be used and exploited with the consent of the individual. This means that players can license their image to teams, leagues, players unions, brands, etc, and receive economic compensation for the use of their image.

Bianca Rothschild explained a case taken to the Tax Court in Brazil involving the football player Neymar. The tax authorities established that Neymar used a family-owned structure, including three companies owned by his father and mother, to avoid paying the higher personal income tax rate (27.5 per cent) by controlling his image rights income through these entities, which may have been subject to lower corporate tax rates (15-25 per cent).

Next, Fabian Birnbaum explained a case from Spain involving football player Lionel ‘Leo’ Messi. The Spanish Tax Authorities investigated Lionel Messi and his father for alleged tax evasion from 2007–2009, regarding €4m derived from his image rights. It was established that Messi assigned his image rights to a Uruguayan company controlled by the Messi family, which resulted in having the income from endorsements be paid to this offshore entity, avoiding Spanish tax.

The third case, discussed by Rachel Kleinberg, was that of Sergio Garcia, a professional golfer with an endorsement agreement with TaylorMade, signed with a Swiss entity. The Internal Revenue Service (IRS) established that 100 per cent of the payment made by TaylorMade to Garcia should be categorised as personal services income, not IP rights for his image. At the end of the case, it was established that only 35 per cent of the payment would be considered personal services income, while the remaining 65 per cent would be considered royalties (image rights).

FIFA’s tax regime

With the FIFA Club World Cup being played in the US in June 2025 and the World Cup to be played in Mexico, Canada and the US in 2026, the panel explained the tax treatment applicable to FIFA, and how local authorities provide special treatment to FIFA events around the globe.

FIFA is organised as a non-profit association in Switzerland: as such, it is exempt from paying taxes on revenues derived from the World Cup. FIFA’s subsidiaries, however, are taxed in accordance with the applicable laws of their respective jurisdictions. This becomes relevant when choosing the next location for a World Cup. On this subject, Alejandro Torres explained how Mexico granted several tax benefits to be chosen as host for the 2026 World Cup, along with the US and Canada.

In 2018 the Mexican Government granted 100 per cent income tax exemption to FIFA. It was also established that VAT on ticket sales to third parties may be levied at a unified rate of up to 10 per cent, with no tax on tickets used by FIFA for its own purposes.

These benefits became effective from 16 June 2022 (the date which Mexico was appointed as host) and will be maintained until 31 December 2028. However, the benefits are now being revised, as in 2020 a constitutional reform prohibited the federal government from granting total or partial tax exemptions to any taxpayer.

Roberto Duque-Estrada then explained the benefits granted by the Brazilian government for the 2014 World Cup and mentioned that the same benefits were granted for the women’s 2027 World Cup. In summary, all payments made by FIFA to individuals who are non-residents in the country, and who are employed or otherwise contracted to work personally and directly in the organisation or execution of the events, and who enter the country with a temporary visa, will be exempt from income tax, as established by Article 10 of Law 12350.

Nevertheless, he explained that there is a tax reform currently being discussed that could affect certain benefits granted, specially related to indirect taxes.

Organisation of sport entities

After analysing the tax regime applicable to FIFA, the panel went on to discuss the most common forms of organisation for sport entities in their respective countries.

Duque-Estrada explained that in 2021 a new law regarding the organisation of football clubs was issued, and this law created the ‘football corporation’ (the sociedade anônima do futebol or SAF), which allowed clubs to transition from the ‘association’ structure, a non-profit model, to a more robust corporate structure, which enabled ‘transparency, corporate governance, professionalisation, restructuring and [the] financial survival of Brazilian football clubs’.

He explained that SAFs have a specific tax regime that allows them to pay 5 per cent tax during the first five years, excluding from the taxable base any income resulting from the transfer of players. After the sixth year, the applicable rate will be 4 per cent and the taxable base would include income from player transfers.

Torres mentioned that in Mexico sports entities are considered non-profit and not subject to income tax; nevertheless, they do need to comply with certain tax obligations, such as withholding taxes when applicable.

In Uruguay, sport organisations are considered as cultural institutions, and as such, non-taxable for national or municipal taxes. Birnbaum explained that, in accordance with Section 67 of Law 17.292, sports clubs may adopt the following legal forms: (1) civil associations and (2) sports corporations (sociedades anónimas deportivas or SADs). Similar to Brazil, the incorporation of SADs allowed sports clubs to operate as a corporation, allowing funding, capital contributions, distributions of dividends, etc.

Jack Bernstein said that in Canada sports entities are organised as corporations, while Kleinberg explained that in the US there are both ‘for-profit’ leagues, like the National Basketball Association (NBA), National Football League (NFL) and Major League Soccer (MLS), and ‘non-profit’ leagues, like the National Hockey League (NHL). However, most teams are organised as partnerships for US tax purposes.

US tax reform

Kleinberg explained that there is a tax reform currently being discussed in the US that could bring several changes to sport entities. The first change is regarding the amortisation of the purchase price of a team classified as a partnership. Kleinberg explained that, currently, as long as the purchase price is attributable to goodwill, it is amortisable over a 15-year period; however, if the tax bill is approved, 50 per cent of the amortisation attributable to goodwill or other intangibles will be eliminated.

Also, Kleinberg explained that a partnership can pay state taxes on behalf of their partners, which allows the individual partners to avoid federal limits on state tax deductions. However, the tax bill prohibits this ‘pass-through entity tax’ (PTET) election if the partnership performs ‘services in the fields of health, law, accounting actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing services, investment management services, and trading or dealing in securities, partnership interests, or commodities, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees’, which would be the case for sport entities.

Other players’ issues – tax residency

The panellists discussed different tax issues that may affect players, such as where a player should pay taxes, the allocation of income between endorsements, image rights and salaries, and whether the player is considered an independent contractor or an employee.

One of the main issues that arises is where the player is considered a tax resident: what happens if a player never spends 183 days in any given jurisdiction? For example, tennis players have a calendar that involves playing in many different countries throughout the year, never spending more than three weeks in the same place.

Another important issue that was discussed by the panellists was how income resulting from the player’s activities should be allocated. Should services income be allocated based on days or games played? How should the income between royalties (image rights) and services be allocated, and how should endorsement income be sourced and allocated? It was concluded that tax treaties are essential instruments to determine how players are taxed.