The Portuguese Government has granted a total exemption on Personal Income Tax (Imposto sobre as Pessoas Singulares) on income earned between 1 January and 31 July 2004 by non-resident football players, coaches and other agents involved in the European Football Championship to be held in Portugal this summer (Decree – Law 30/2001).
This special tax regime has been created to avoid the taxation of non – resident individuals participating in UEFA EURO 2004 that otherwise could be subject to Portuguese taxation. In fact, in accordance with the Portuguese Individual Income Tax, the employment income earned by a non-resident individual is subject to a withholding tax at a final rate of 25% if the work is physically performed in Portugal. An individual is considered to be a resident of Portugal if he is present in Portugal for more than 183 days in any calendar year.
However, these tax benefits are creating a strong controversy in Portugal due to their discriminatory effects among players. The national team, for instance, is composed of both resident players (like Ricardo, Rui Jorge or Deco) and non-resident players (such as Figo, Rui Costa, Pauleta or Cristiano Ronaldo) and only the latter would be able to benefit from the tax exemptions.
In addition, these tax incentives have been further criticised for the fact that they cover a period of seven months (and not only the period of approximately thirty days when UEFA EURO 2004 will be played) and also because they include all types of income and not only the income directly related to the Championship.
Finally, the entities organizing the UEFA EURO 2004 in Portugal as well as the National Football Associations of the countries participating in the event will also be exempt from Portuguese Corporate Income Tax on any income received between 1 January and 31 July 2004.