The IRS is lining up a World Cup payday of its own
Spain or Argentina will receive FIFA’s $50 million top prize, and tax experts say U.S. authorities will be waiting for their share.
By Frankie Delgado · News Reporter
4 min read
The World Cup champion will collect $50 million from FIFA, but tax experts say the winning side will not be the only one celebrating a payday.
With Spain and Argentina set to meet in Sunday’s final in East Rutherford, N.J., accountants who work with athletes say the U.S. tax system is squarely in the match. Money earned on American soil is generally taxable by the Internal Revenue Service, according to experts cited by MarketWatch.
Robert Raiola, director of the sports and entertainment group at PKF O’Connor Davies, told MarketWatch that the IRS gets a share no matter which team wins. He said the issue extends beyond players to coaches, staff and referees.
FIFA’s first-place award is part of a $655 million prize pool for national teams, distributed according to tournament performance, MarketWatch reported. FIFA does not pay players directly. The money goes to national soccer federations, which then decide how to distribute it among players, managers, support staff and others.
A tax tournament inside the tournament
Rob Fagan, a senior manager in KPMG’s Washington National Tax practice, rated the World Cup’s tax difficulty at 8 out of 10 in comments to MarketWatch. KPMG has advised some national soccer federations on World Cup tax issues, he said.
Professional athletes already face complicated tax lives because they compete across borders and may be paid through salaries, bonuses, royalties, endorsements and other business arrangements. At the World Cup, the questions multiply because national teams, foreign players, tax treaties and host-country rules all collide.
Fagan said star players are likely to have advisers handling the paperwork, while players new to the tournament’s global spotlight may be surprised by the process.
An April report in The Guardian said the federations behind participating World Cup teams were expected earlier this year to become tax-exempt entities. The Guardian also reported that FIFA has held tax-exempt status since 1994. MarketWatch said FIFA, the IRS and the Treasury Department did not immediately respond to requests for comment.
Fagan told MarketWatch that federation-level tax exemptions do not automatically shield players, coaches or staff who ultimately receive money.
Treaties can change the bill
International tax treaties may reduce or block some U.S. income or payroll taxes, according to Fagan. Those deals are meant in part to prevent the same income from being taxed twice, but they can include special rules for foreign athletes and entertainers.
The U.S. has a tax treaty with Spain but not Argentina, according to an IRS database cited by MarketWatch. Spain and Argentina are scheduled to play the final Sunday at 3 p.m. Eastern in New Jersey. France and England are due to play Saturday at 5 p.m. in Miami for third place.
Christopher Hall, a director in the international tax group at PKF O’Connor Davies, told MarketWatch that even players on the same team may face different tax answers. He said questions can depend on where a player lives, where his club is based, which national team selected him and whether treaty language covers players but not other members of the group.
The IRS said last month it had reached a consensus with tax authorities in Canada and Mexico, this year’s co-hosts, on how to identify income sourced to each country. The IRS’s National Taxpayer Advocate also published a World Cup tax guide for foreign participants, including players, coaches, staff, media workers and businesses, and advised them to seek professional help.
States want a piece too
Federal taxes are only one layer. MarketWatch reported that 11 U.S. cities across nine states hosted 78 World Cup matches. Texas, Florida and Washington do not have state income taxes, but other host states do.
Raiola said athletes can owe state income tax where they earn money, even if they live elsewhere. That system is commonly called the “jock tax,” he told MarketWatch.
Sunday’s final is in New Jersey, which has an income tax. Fagan also noted that New Jersey does not follow international tax treaties. Raiola told MarketWatch that players in the Spain-Argentina final will pay tax on that game.
This story draws on original reporting from MarketWatch.