Footballer's share of a transfer fee and the quasi-payroll tax on excessive severance payments
Two lower tax court decisions have been published in the Netherlands concerning a payment to a football player of a share of a transfer fee and the application of the quasi-payroll tax on excessive severance payments. The first court decision set aside this extra tax because of a conflict with the European Convention on Human Rights (ECHR), while the second came to the opposite result, seeing no conflict with international rules. Therefore, the football club in the second case was obliged to pay the quasi-payroll tax, in addition to the top rate of payroll/income tax that the football club had already deducted from the football player.
Given the opposing decisions of the two lower tax courts, it is unlikely that Netherlands football clubs will continue making these agreements with their top players. There is a significant risk that the final Hoge Raad decision will be that the football player’s share of the transfer fee is subject to the extra quasi-payroll tax when the payment exceeds EUR 530,000, and it will take about three more years before the Hoge Raad’s final decision. This means that Netherlands football clubs have to change their business model in this respect, pay higher salaries to their top players and keep the transfer fees completely for themselves. But this will bring down their competitiveness relative to football clubs from bigger countries and will not be good for the strength of Netherlands football teams.
Molenaar, D. (2017). Footballer's share of a transfer fee and the quasi-payroll tax on excessive severance payments. European Taxation, 2017(November), 512–514. Retrieved from http://hdl.handle.net/1765/102687