The Netherlands: Tax burden on leaving bonuses for professional soccer players

By Dr Rijkele Betten

Recently, several Netherlands soccer clubs have complained about the taxes that are due on leaving bonuses paid to leaving professional players.

For some time, it has been the common practice for players’ contracts to include a provision, which would entitle a leaving player to part of the transfer sum paid by a new club.

Both club and player would benefit: the club did not have to pay these amounts upfront, but could wait until liquidity became available; and the player would receive a significant amount when leaving to join a new club (playing in a more valuable competition).

These arrangements now are covered by new wage tax arrangements in The Netherlands.

The Netherlands legislator wanted to stop the phenomenon that older employees would receive lump sum payments in order to make them leave their job before their pension date. This was achieved by imposing a penalty on the employer making the payment. The penalty amounts to 75% of the leaving bonus. Also, the player himself will have to pay Netherlands income tax at the rate of 52%, so that the Netherlands tax revenue, in effect, receives an amount that is well above the leaving bonus – an aggregate of 127% of the bonus!

This tax consequence is said to be an obstacle for renewing contracts with young promising players in The Netherlands. So, the clubs are asking the Netherlands Soccer Association to discuss this issue with the Dutch Tax Authorities and Parliament.

It will be interesting to see what the outcome of this move will be!

 

Dr Rijkele Betten is an International Tax Consultant and the Proprietor and Managing Editor of ‘Global Sports Law and Taxation Reports’ and may be contacted by e-mail at ‘betten@xs4all.nl’.