53 days of hard work — and in return a record sum of EUR 25.6 million for the World Cup title… but what about the taxes? 2014: The DFB (Deutscher Fußball-Bund, the German Football Association) collects the equivalent of approximately EUR 25.6 million from the world governing body FIFA (Fédération Internationale de Football Association) for the World Cup title: a record sum. Each player receives around EUR 300,000 of this from the DFB — a nice bit of pocket money, wouldn't you say? For comparison:
- 1954: First German World Cup title in Switzerland; the "Miracle of Bern". Each German player received pocket money of DM 2,500, a television, a leather suitcase and a motor scooter.
- 1974: Second German World Cup title in Germany. Each German player received DM 70,000 and a VW Beetle.
- 1990: Third German World Cup title in Italy. Each German player received DM 125,000.
So how are professional athletes actually taxed? Footballers belong to the category of so-called "team sports athletes" and, for tax purposes, are classified as employees; they are therefore employees of their club and, as a rule, generate income from employed activity. Their ongoing income is thus subject to standard wage tax deduction ("Lohnsteuerkarte"). In our view, the prize money for the World Cup title that the players receive from the DFB should therefore be treated as "wages from a third party" and would likewise be subject to wage tax deduction (i.e. income from employed activity), since the payments made by the association to the players in this regard form part of the wages accruing within the framework of the employment relationship with the club. However, the employment contract often also covers the marketing of a player's personality rights. National team players are regularly "loaned out" to the association. So how should the income that national team players receive from marketing activities (for example, wearing advertising shirts, etc.) with the association and the national team be classified? The BFH has ruled on this (BFH of 22.02.2012, X R 14/10) that the income of a national team player from advertising services on the basis of contracts concluded with the association must be classified as commercial income. The player therefore generates income from this as a self-employed entrepreneur, on the grounds that he is free to enter into the advertising agreement, e.g. with the football association, because the obligation under labour law to participate in matches of the national team, as set out in the DFB model employment contract for players of the Football Bundesliga, does not include participation in advertising services. Income from advertising services for the player's own club is treated differently. Because the footballer is integrated into the structures of his own club and bound by its instructions, such income is classified as income from employed activity within the framework of his employment relationship. A particular issue for footballers is usually the area of work-related expenses (Werbungskosten), which tend to be very extensive. Several matters warrant special attention here, including: maintaining two households, additional subsistence expenses, training costs, travel expenses, expenses for language courses, application costs, and so on. Special considerations for foreign professional players A fundamental question regularly needs to be clarified in advance for foreign players active in Germany: which state has the right to tax? It must therefore always be examined first which state has which taxation right. Germany has concluded so-called "double taxation treaties" with many countries, which regulate taxation so that income does not have to be taxed twice. Many countries have agreed, for example, that income is taxed by the state in which the footballers are active: the "place of activity" is therefore generally decisive. Conclusion on the taxation of national team players Although the players appear to generate only "perfectly ordinary income" as employees, they may at the same time also become entrepreneurs. Within the framework of the professionals' personal income tax returns, making full use of all the options provided by law can entail a considerable amount of work, since each individual cost area must be examined individually and made use of in the tax return.
Frequently asked questions
Frequently asked questions
What type of income do professional footballers earn from their club activities?
For tax purposes, professional footballers in team sports are considered employees of their club. Their ongoing remuneration therefore constitutes income from employment and is subject to standard wage tax deduction. Advertising income earned within the employment relationship with the player's own club also qualifies as employment income due to the player's obligation to follow instructions.
How is a World Cup bonus paid by the DFB to national team players treated for tax purposes?
According to the prevailing view, a World Cup bonus paid by the DFB to the players qualifies as wages from a third party. It is therefore part of income from employment and subject to wage tax withholding, as the payment accrues within the scope of the existing employment relationship with the club.
How are advertising income of a national player from contracts with the DFB taxed?
According to the BFH ruling of 22 February 2012 (X R 14/10), advertising income earned by a national player under contracts with the federation qualifies as commercial income. The player thus generates this income independently as an entrepreneur, because the employment-law obligation to participate in international matches does not include an obligation to participate in advertising activities.
Which income-related expenses are particularly relevant for professional footballers?
For professional footballers, the key items to review are double household management, additional meal allowances, travel costs, training expenses, language courses and application costs. These expenses often arise in substantial amounts and should be individually determined and claimed in the income tax return.
Which country has the right to tax foreign professional athletes performing in Germany?
For foreign professional athletes, the applicable double taxation treaty must first be examined to determine which country has the right to tax. Many treaties stipulate that income is taxed at the place where the activity is performed, so Germany generally has the right to tax when the athlete competes in Germany.