Italy: footballers’ tax liability resulting from agent’s remuneration paid by the club

The topic of agents’ fees has given rise to a notable tax dispute in Italy between the clubs and the players on one hand, and the Italian tax authorities on the other. Often, a club will appoint an agent when transferring a player and will pay that agent a fee. Italian tax authorities argue that the agent’s services are actually provided for the benefit of the transferred player, and so the fee should be treated as a taxable income in the hands of the player when assessing the player’s tax liability. Unsurprisingly, the players dispute this.

In late 2013, to try to end the dispute, the Italian legislator enacted a special provision known as “Decree 917/1986”,¹ which deems a portion of the agent’s fee payable on the transfer of a player to constitute a taxable income in the hands of the player. The provision targets payments made to agents appointed directly by the clubs to conduct negotiations on their account and to agents (if any) appointed by the player. The rule has a triggered a conspicuous number of Court decisions, not always giving consistent results.²

The article explains the effects of Decree 917/1986 as it applies to payments made by Italian clubs to agents on players’ transfers.³ The author understands that similar issues are also being discussed in other major EU jurisdictions (for example Spain, UK and the Netherlands).

Italian tax rules applicable to football players

The professional sporting relationship between a club and a player is regulated by Law no. 91 of 23 March 1981 (hereinafter “Law no. 91/1981”).⁴ Under Law no. 91/1981, professional footballers are deemed to perform their services in the framework of an employment relationship. The main features of this employment relationship are (i) the provision of a consideration for the activity performed by the player and (ii) the carrying out of the activity on a continuous basis.⁵

As a consequence, income earned by football players in the framework of an employment contract with an Italian club is regarded as employment income.⁶

Under Italian tax law, employment income is taxed:

1. on a cash basis, i.e. the income is taxed in the calendar year in which the employee materially receives the payment of the remuneration;⁷ and
2. on a gross basis, i.e. expenses that are related to the production of income are non-deductible.

In general, employment income includes any remuneration that is directly or indirectly paid by the employer (the club). Such income encompasses every payment, either in money or in kind (including gratuitous payments), received by the employee/player in the framework of the employment relationship.⁸

In case of benefits in kind, the related value is generally determined by reference to the market value (Art. 9 Decree 917/1986), unless special rules are applicable for the computation of the fringe benefit’s amount (such as for cars and motor-vehicles).

Last but not least, Italian clubs act as withholding agents with regard to the remuneration paid to the players, and thus levy a non-final withholding tax upon the material payment of such remuneration. The employment income of the player must then be included in the overall income which is subject to personal income tax (the tax burden may reach up to 43% for income exceeding euro 75,000) plus municipal and regional sur-taxes (up to a maximum of 2%) and a solidarity charge (at the rate of 3%) levied on the portion of annual personal income exceeding euro 300,000 (this charge is due up to the fiscal year 2016).