Spanish Tax Authorities Welcome Ancelotti to Madrid

By Kevin Offer

Carlo Ancelotti’s return to Real Madrid has also caught the eye of the Spanish tax authorities. It is reported by El Mundo that the Spanish Treasury has contacted Real Madrid to seize Ancelotti’s wages to ensure payment of a tax debt that relates to his first spell at the club between 2013 and 2015. It is claimed that the debt arises from the use of an English company to receive payments relating to image rights resulting in a lower tax rate than required.

Ancelotti is reported to have been summoned to appear before a Madrid court on 23rd July to explain the arrangements. He has the option to pay the tax, plus interest and a potential penalty, or to defend the arrangements at a trial. With a custodial sentence possible and the distraction from his managerial role at Real Madrid that a trial would create it may be expected that he will settle.

However, if Ancelotti and his advisers are confident the arrangements are commercial and the correct amount of tax has been paid, they may be inclined to defend the case. They may also take some comfort from the recent report that the Supreme Court in Madrid has confirmed the acquittal ruling received by Xabi Alonso in his tax fraud case.

Alonso was resident in Spain in 2010, 2011 & 2012 during which time he failed to pay Spanish tax on payments for image rights on the basis that the image rights were owned by a company based in Madeira. A Provincial Court in Madrid determined that, whilst the facts did fit into the category of tax fraud, Alonso acted in the belief that the arrangements were in accordance with the law. The Supreme Court ordered a retrial but have now confirmed the acquittal on the charges of tax fraud and the case may now be considered closed.

The Alonso case and the taxation of image rights in general has been covered in detail in a number of issues of the Sports Law & Taxation journal. If you would like a subscription then please contact us.