#intermediaries #dualrepresentation #ban #newpractices
Monday, 20 July 2020 - On 1 July 2020, the Belgian FA published a new edition of its national regulations on working with intermediaries (‘Belgian Regulations’), which have come into effect immediately.1 The Belgian Regulations not only implement the FIFA Regulations on Working with Intermediaries2 but also introduce a number of rules and regulations that go well beyond the FIFA Regulations’ current scope.
An important development is the introduction of a ban on dual representation agreements. From now on, intermediaries are prohibited from representing, directly or indirectly, both the player and the club in a transaction. Also, an intermediary may no longer simultaneously represent both the selling and the buying club in the same transaction.
“From now on, intermediaries are prohibited from representing, directly or indirectly, both the player and the club in a transaction.”
The dual representation ban significantly affects the way clubs and agents interact from now on.
BAN ON DUAL REPRESENTATION
Previously in Belgium, clubs paid the intermediary, even if the intermediary clearly initially represented the player and not the club. In practice, the intermediary fee was construed as a brokerage fee and the intermediary’s work was considered to (also) benefit the club, as a result of which no benefit in kind was declared. With the new Belgian Regulations, such an approach is no longer possible.
The intermediary must choose: either he or she works on behalf of the club or on behalf of the player. But working for both the club and the player is no longer possible.
CONTINUED PAYMENT/FINANCING OF AGENTS BY CLUBS?
Going forward, we see two options for a club continuing to pay/finance the intermediary fee.
First, the club could pay an additional fee to the player, which the latter can use to pay his agent. The argument, sometimes made by clubs and agents alike, that the player cannot be required to pay a commission to his agent is incorrect. Based on the applicable mediation legislation and the Belgian Supreme Court’s case law, a player can pay his agent directly provided certain conditions are met.
“Based on the applicable mediation legislation and the Belgian Supreme Court’s case law, a player can pay his agent directly provided certain conditions are met.”
Second, it remains possible for the club to pay the intermediary on behalf of the player for services provided that benefit the player. The main consequence thereof is that there will be a corresponding taxable benefit in kind for the player. This is because the employer/club has borne the cost of the intermediary services enjoyed solely by the employee/player. Granting a benefit in kind results in a wage tax and reporting obligation for the club. The club is liable for the corresponding wage tax due on the benefit-in-kind and the wage tax is to be withheld from the player’s cash salary or bonuses. The club is also obliged to report the benefit-in-kind on the salary and tax slips. The club may also be unable to recover the VAT upon the intermediary fee but this risk, which also existed for dual representation agreements, does not outweigh the transparency and the lack of conflict of interest. On their side, players should not face an increased overall tax burden as the Belgian Income Tax Code (‘BITC’) allows the players – later on - to deduct the intermediary fee as a professional expense via their personal income tax return. Hence, there should only be a short-term negative impact on the player’s net cash position. A way to mitigate the impact on the player’s monthly cash position would be to have the intermediary fee paid by the club in monthly instalments. As such, the corresponding wage tax on the benefit-in-kind would be more aligned with the monthly salary, which decreases the impact on the player’s monthly net cash position.
“On their side, players should not face an increased overall tax burden as the Belgian Income Tax Code allows the players – later on - to deduct the intermediary fee as a professional expense via their personal income tax return. Hence, there should only be a short-term negative impact on the player’s net cash position.”
The Belgian Regulations have only been operating for a few weeks now. However, it has already become clear that some agents and clubs are struggling to adopt to the new rules.
Parties who do not comply with the Belgian Regulations, including the ban on dual representation, can face a number of penalties that vary for the player, club and intermediary. Such penalties may be imposed cumulatively.3
Following “footgate”, the scandal around money-laundering, corruption and match-fixing in Belgian football, an important step has now been taken by the Pro League and the Belgian Football Association. The Pro League in particular has made it its mission to set an example and join the limited number of countries with a strict prohibition on dual representation.
Criticism is fierce, not in the least with some agents and clubs reluctant to adopt the new practices. Some would have preferred regulation over prohibition. Sources even indicate that intermediaries may fight the prohibition on dual representation before the courts and/or the competition authorities.
On the other hand, agents working in full transparency with their players (e.g. in terms of total commission earned) and offering proper added value for their players throughout their careers, may applaud the effective end of “switching” (i.e. the practice of an intermediary suspending his/her agreement with a player to switch to representing a club, and then to return to representing the player again afterwards) and embrace the new practices.
Whether one likes the new Belgian Regulations or not, they have been adopted. Any club, intermediary or player not respecting the rules takes a big risk and players more than ever require professional assistance in filing their annual Belgian tax returns.
For more information on this subject, please contact:
1 The Belgium Regulations on working with Intermediaries, available to view here (in Dutch), https://belgianfootball.s3.eu-central-1.amazonaws.com/s3fs-public/rbfa/docs/pdf/reglement/bondsreglement_reglement_federal/KBVB_bondsreglement_Boek_B_Titel8_Tussenpersonen.pdf
2 Current FIFA Regulations on Working with Intermediaries, available to view here, https://resources.fifa.com/image/upload/regulations-on-working-with-intermediaries-2367763.pdf?cloudid=cr6dquxm2adupv8q3ply
3 Article B.8.54 – B.8.58 of the Belgian Regulations.
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