From the Staff: By popular demand (or at least a couple of vague questions about it) we will be presenting a (somewhere between weekly and sporadically) column on the soccer, or football as most of the world calls it. Also, to keep it really interesting, we will also include Australian Rules Football and Rugby Football. First up is…

Euro Futbol! And a lesson in Spanish tax compliance.


It’s silly season in European football. Sillier than normal so far, because thanks to a new TV deal, Premier League clubs have more money than ever, and they’re spending it left and right. Manchester City spent £35 million to replace a keeper they bought for £17 million last season (after it took about 3 games to realize he sucked). Outside of England, not much is going on, though there are lots of big money rumors. Makes sense, because the transfer window (the period during which player transfers are allowed to take place) doesn’t start until July 1.

Even though it’s mid-June, the first qualifying round for the UEFA Champions League starts in a week, featuring teams from countries where you could probably get onto a top division club if you wanted to.

Champions League, First Qualifying Round (First games June 27/28, second games July 4/5)

Víkingur (Faroe Islands) v Trepça ’89 (Kosovo)
Hibernians (Malta) v FCI Tallinn (Estonia)
Alashkert (Armenia) v FC Santa Coloma (Andorra)
The New Saints (Wales) v Europa (Gibraltar)
Linfield (Northern Ireland) v La Fiorita (San Marino)

Expect each of the victors to lose to bigger opponents in the Second Qualifying Round.

Since not much is going on, we’ll go to an actual libertarian subject: Taxes. More specifically, the Spanish government prosecutions of Lionel Messi, Neymar, Cristiano Ronaldo, and possibly Jose Mourinho for tax evasion.

Under Spanish law, individuals who spend 183 days or more in a year in Spain are considered to be residents for tax purposes. Since footballers would naturally spend more than 183 days a year in Spain, they became residents for tax purposes (even if their true home was elsewhere), and thus owed Spanish tax on their worldwide income.

In 2005, the Spanish government approved Royal Decree 687/2005, which allowed a foreign resident who has relocated to Spain from another country the choice of being taxed as a Spanish resident or non-Spanish resident. The choice was valid for five years. By choosing to be taxed as a non-Spanish resident, such individuals could avoid Spanish tax on their worldwide income, paying Spanish tax only on income actually earned in Spain. This came to be known as the “Beckham Law” because the first foreign individual to take advantage of it was David Beckham, after his move from Manchester United to Real Madrid.

What all of this meant was that such individuals would not pay Spanish tax on their non-Spanish derived income and would pay a 24% tax rate on their Spanish income, as compared to the 24 to 43% progressive rate paid by Spanish residents. The law also disallowed deductions, meaning it was only applicable to higher net-worth individuals.

In November 2009, the Spanish government reversed the law, and individuals entering Spain after January 1, 2010 would not be able to benefit from the law. The law was fully repealed by 2014. Higher net worth individuals, of course, looked for ways to reduce their tax burdens.


Lionel Messi, who had entered Spain before he law had taken effect, was the first to face prosecution for tax evasion (or tax fraud, according to Spanish authorities). According to the Spanish prosecutors, Messi and his father had used companies in Belize and Uruguay to sell his image rights, thus hiding the income from Spanish authorities. Messi and his father were thus accused of hiding €4.1 million in income from Spain as a result.  Messi ended up paying €5.1 million in back taxes, was convicted of tax fraud and sentenced to 21 months in prison (suspended, because all Spanish prison sentences under 2 years are automatically suspended where the individual does not have a prior record) and paid another €1.7 million in fines.

My taxes are thiiiiis high!

Neymar’s case has less to do with taxes and more to do with an outright fraud case, though taxes do play a part. When Neymar moved from FC Santos to Barcelona, the transfer fee was a reported €17.1 million. At the time, 40% of the ownership of Neymar was in the hands of DIS Esporte, a Brazilian investment group. As such, they were entitled to 40% of the fee, or €6.8 million. The accusation, however, is that an additional €40 million fee was classified as a wage instead of a transfer fee. This had the effect of reducing Barcelona’s tax burden (for which they’ve already paid a €5.5 million fine) and potentially defrauding DIS of an additional 40% cut from that €40 million. Like Messi, Neymar is unlikely to see prison even when he’s convicted.

How about we settle at 3 million?

Cristiano Ronaldo, who moved from Manchester United to Real Madrid in 2009, is now facing a similar fate to Messi. Ronaldo’s lawyers claim that, since he entered the country before the termination of the law, he had the right to protection under the Beckham Law. Ronaldo, according to Spanish prosecutors, was paid €153 million in December 2014 – just before the full repeal of the Beckham Law – for image rights for a future time period, 2015 to 2020, where the Beckham Law would not be in effect and the tax burden would be higher. Ronaldo fully paid his required taxes on that amount. Again, like Messi and Neymar, he’s unlikely to face prison even if convicted.

Hark! The Taxman Cometh?

And now this week, Jose Mourinho has been accused of a similar fraud, with Spanish prosecutors accusing him of evading €3.3 million in taxes between 2011 and 2012.

Are you saying I might have to assume this position?

But back to Ronaldo, this has him fed up with Spain, and there are rumors abound that he could be headed back to England and Manchester United for a ridiculous sum (£175 million plus £60 million rated goalkeeper David de Gea according to one rumor). Outside of very famed clubs (Barcelona, Madrid, Paris St. Germain), players are seemingly starting to become more interested in heading to England (or Monaco) than to Spain and France, because of the tax burdens their footballing income create.

I’ll try to end every one of these columns with a footballing quote. This one comes from the greatest manager in football history, Bill Shankly. On football and on the Merseyside derby.

I’ve seen supporters on Merseyside going to the ground together, one wearing red and white and the other blue and white, which is unusual elsewhere. You get families in Liverpool in which half support Liverpool and the other half Everton. They support rival teams but they have the same temperament and they know each other. They are unique in the sense that their rivalry is so great but there is no real aggro between them. This is quite amazing.

I am not saying they love each other. Oh, no. Football is not a matter of life and death … it’s much more important than that. And it’s more important to them than that. But I’ve never seen a fight at a derby game. Shouting and bawling … yes. But they don’t fight each other. And that says a lot for them.