Football agents still play a major role in the modern world of football. They act as intermediaries between players, coaches, clubs and other parties involved in transfers, contract negotiations and career planning. Typically, an agent represents either the player or the club, and the agent’s fees are paid by the party they represent.
However, the reality differs somewhat from the theory. It is common for clubs to pay (part of) the player’s agent fees directly to the agent. At first glance, this sounds like a financial advantage for
players, but in practice it often leads to a tax headache. Many players are unaware that such payments by the club are considered a benefit in kind for the player, which means they are taxable.
Ruling by the FPS Finance
Within this context, on 16 July 2024, following a application submitted by the Pro League, the Federal Public Service Finance (“FPS Finance”) set out in its Preliminary Decision No. 2024.0461 the tax treatment applicable to the player or coach in the event that the club pays part of) the player’s agent’s fees.
This Ruling entered into force retroactively on 15 June 2024 and is valid until 14 June 2029, after which it may be renewed.
If the club bears the agent’s fees, these may be (partly) taxed in the name of the player as a benefit in kind.
Qualification as a benefit in kind
A benefit in kind is a benefit that an employer or company grants to an employee that is taxed as professional income in the name of the employee. The payment of an agent’s invoice by the club will therefore only be considered a benefit for the player if the club pays an invoice for agent services provided for the benefit of the player.
Consequently, it must first be determined who is the beneficiary of the services (i.e. the club or the player). Either an agent acts as a 100% player agent, in which case the full amount of the agent’s invoice charged to the club will be taxed as a benefit in kind in the player’s name. Or the agent acts partly on behalf of the player and partly on behalf of the club (also known as ‘dual representation’), in which case a percentage split between the club and player services must be determined.
Calculation of the benefit in kind
In order to answer the question of which party should be regarded as the client for which share of the services provided, or in other words, which part of the fee relates to player services and which part to club services, the Pro League has developed an allocation method in the form of a schematic decision tree to support its application. This decision tree determines who is the beneficiary of the agent’s services and therefore wo is in principle responsible for the agent’s commissions. The decision tree distinguishes between four situations:
- incoming transfer or incoming loan: the transfer of the player’s registration and/or the conclusion of an employment contract;
- change in the terms of the employment contract;
- outgoing transfer or outgoing loan: the termination or suspension of the employment contract; or
- outgoing transfer: the transfer of the player’s registration.
Depending on the tests and subtests from the decision tree, the following five distributions can be made with regard to the agent’s fees:
- 100% payable by the player;
- 75% payable by the player – 25% payable by the club;
- 50% payable by the player – 50% payable by the club;
- 100% payable by the club; or
- percentage or amount payable by the player as agreed in the representation agreement (with
a minimum of 75%).
The percentage of the services provided by the agent on behalf of the player and subsequently paid by the club on the basis of the decision tree will be considered a benefit in kind for the player and taxed as such.
Conclusion
In principle, the Ruling merely confirms current practice, but many players and coaches are still unaware that the payment made by the club may later be taxed as a benefit in kind, resulting in a reduction in their net salary.
Thanks to the new decision tree provided by the Pro League, there will now be more certainty about the amount on which players will actually be taxed. If the club, player and agent follow the decision tree in good faith and support it with the necessary evidence, it will be difficult for the tax authorities to dispute this later.
PowerPlay supports you with your questions about representation agreements and their tax treatment.