Believe it or not, there are strong ties between football (soccer) and the offshore world.
First becoming popular “thanks” to the Panama Papers leak, football public figures – including players and officials – are named and shamed publicly due to their involvement in the use of tax havens in their personal financial management.
However, it’s not a new thing, really. Celebrities, famous sportspeople, billionaires and political figures are using offshore structures for decades. Just like you and me, it’s their endeavor to protect their assets. They even have more legitimate reasons to do that than the rest of us: Their public images are under constant attack and lawsuits seem bound to happen anytime they say or do something – just because they are famous and influential.
And on top of that, they’re not against the law in the process.
So, let’s dig deeper about the involvement of footballers in the offshore world – why they do it and how.
Perhaps the most famous footballer who involves in offshore structures is Lionel Messi. The Argentine footballer who played for Barcelona in the Spanish Premier League is one of 20 top footballers who was named in the leaked Panama Papers.
He and his father were accused for committing tax fraud, ‘hiding’ EUR4.1 million in taxes via shell companies in Belize and Uruguay. He has had his trial and denied his involvement in the tax fraud accusation. He was found guilty and sentenced to 21 months of imprisonment, served under probation.
But Messi and the 20 top footballers are not the only ones. In reality, there are hundreds if not thousands who engage in offshore activities. Just like Messi, but choosing to take the tax avoidance path, instead of tax evasion one, some other footballers are using shell companies to protect their image rights.
And 180 of such footballers were just revealed. Recently, the news about Premier League footballers who involved with shell companies – 180 of them – has become viral. They allegedly use shell companies to handle their income related to image rights. It’s said that using shell companies cut their income tax by half – legally.
Wayne Rooney, Theo Walcott, Joe Hart, Danny Welbeck and Gareth Bale are some well-respected names in the Premier League who use shell companies.
But why do they get involved in shell companies? How do they do it? Read on.
As mentioned above, just like you and me, top footballers want to secure their assets in offshore structures. As most footballers are only having 15-20 years of playing career, they need to be smarter in managing their assets so that they can be financially independent after they retire.
But why image rights? Why do they need to be protected?
Very much similar to others in professional sports, footballers’ most valuable assets are their image rights. The provision of image rights is protected by laws, including the commercial exploitation of the footballers. Having Lionel Messi to endorse your product is very expensive, but the return on your investment due to Messi’s popularity will be many times over.
Unfortunately, just like any other brands and intellectual properties, the image rights are often misused – by the endorsed brands, competitors, copycats, and so on – not mentioning attracting lawsuits, which are sometimes for some absurd reasons. In such situation, footballers’ income from their image rights is constantly under threat. They need ways to protect their most valuable assets, and one of them is via the use of offshore structures, typically shell companies.
The footballers took advantage after UK tax authorities (HMRC) were allegedly agreed to a non-formal deal, which essentially allowing popular footballers to have a fifth of their salaries as considered as payments for image rights.
Making use of the agreement, the footballers are sending the one-fifth of the salary mentioned above to their shell companies.
Here’s how the simple math that makes the above arrangement works: UK corporate tax is 20 percent. UK personal tax for high income is about 40 percent. So, you’re basically cutting your income taxes in half for the one-fifth of the salary.
Not much, but it’s quite an amount of money saved. And it’s a legal tax avoidance arrangement.
Not only that, many popular Premier League footballers enjoys income outside his salary, typically via product endorsement. When carefully structured, shell companies can secure their off-the-field income and reduce their taxes, as well.
Of course, we can’t simply copy what the footballers are doing with their tax planning, as their cases are unique (I don’t think most of us will ever need to protect our image rights.) However, we can get some ideas on how to use offshore structures to legally avoiding taxes and, at the same time, protecting their assets.
For more information on how to setup offshore structures of your own, please visit our website at ICOServices.com.