Belgian football clubs face limited tax deductibility of intermediary fees

#belgianfootball #sportslaw #intermediaryfees

Saturday, 2 January 2021 - The Belgian political party CD&V plans to introduce a draft-bill seeking to cap the tax deductibility of intermediary fees.

The draft legislation comes in response to numerous scandals in Belgian football involving agents and the ever-increasing intermediary fees paid by Belgian football clubs. CD&V now seeks to discourage clubs from paying excessive agents’ fees.

Clubs subject to corporate income tax are currently able to deduct intermediary fees paid in consideration for services provided by agents to the clubs. The draft-bill is expected to introduce a cap on the tax deductibility for agents’ fees amounting to 3% of the player’s annual salary.

The 3% cap is to apply to incoming and outgoing transactions:

• Fees paid to an agent representing a player in concluding an employment agreement with a club;
• Fees paid to an agent representing a club in concluding an employment agreement with a player;
• Fees paid to an agent brokering a deal between two clubs.

The portion of the intermediary fee exceeding the 3% cap will no longer be tax deductible.

Important to note: clubs in a loss position will see their minimum tax basis increased with fees in excess of the cap, entailing a guaranteed corporate income tax liability (and cash out) on the corresponding amounts. It is understood that clubs subject to the legal entities tax (rather than the corporate income tax) will also face an increased tax burden when paying excessive fees.

Needless to say that introducing the 3% cap will have a severe impact on Belgian football clubs’ tax position, as the average intermediary fee in transactions generally exceeds the cap, especially in the event of outgoing transactions where the agent’s fee is often calculated as a percentage of the transfer sum.

Implementing the draft bill will require further clarifications, not in the least a clear cut definition of the calculation base for the cap (‘’annual salary of the player”).

Your Atfield experts will of course follow up on the matter and inform you of further developments!

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