Saudi Arabia and their Public Investment Fund (PIF) have been dominating the sports news pages in 2023, initially through their involvement in golf but more recently because of their “investment” in football.
Their motives for that aren’t the subject of this blog but safe to say they’d like us all to ‘think Saudi, think sport’, and there might well be a football World Cup there in 2030…
Cristiano Ronaldo has been followed this summer by an ever increasing number of high-profile transfers – including many from the English Premier League.
Part of (arguably the whole of) the appeal of Saudi is the ability for players to earn much more money than they do currently.
The gross salaries reported to have been offered have generally been a step up from players’ current salaries, but there’s no doubt that it’s the difference in net salary that has players considering a move to Riyadh, because – unlike the UK where players lose nearly half their salary in tax – “if you’re playing in Saudi, there’s no tax, right?”
As ever with tax, the answer is “it depends”…
It’s true that there’s no income tax for players to pay in Saudi. However, for those players that are moving to Saudi from the UK, it’s not quite as straightforward as that.
Breaking UK Tax Residence
Players moving to Saudi from the UK this summer will almost certainly have spent enough time in the UK since 6 April 2023 for the default position to be that they are UK tax resident for the 2023-24 tax year, and therefore subject to UK tax on their worldwide income up until 5 April 2024.
The issue here then isn’t the Saudi tax position but breaking UK tax residence on the day of departure (claiming the “split year treatment”) to ensure that no tax is paid in the UK on that Saudi income.
Players moving abroad typically look to qualify for the split year treatment under the “starting full time work overseas” claim. There are, however, a couple of other conditions that must be met for this claim to be valid, the first of which is “continuing full time work overseas”.
To claim the split year treatment in 2023-24, the player must also be working full time overseas in the tax year following the tax year of departure (in this case 2024-25), such that they aren’t UK tax resident in that year either.
In short, this means that the player must remain in employment with the Saudi club (or another non-UK club) until at least the summer 2025 transfer window.
the player must remain in employment with the Saudi club (or another non-UK club) until at least the summer 2025 transfer window
Have Your Cake and Eat It
The second additional condition is the amount of time (or technically ‘midnights’) that the player is permitted to spend in the UK in each tax year.
For the 2023-24 tax year (the year of departure), the midnights that an individual can spend in the UK following their departure, depend on the date of that departure. Someone leaving for Saudi in July 2023 can spend 67 midnights in the UK before 5 April 2024, for those leaving in August 2023 it is 60 midnights.
someone leaving for Saudi in July 2023 can spend 67 midnights in the UK before 5 April 2024
On top of this, the player would need to spend less than 91 midnights in the UK in the period 6 April 2024 to 5 April 2025 – so they would also be unable to spend significant periods of time in the UK during the off-season and/or “pop back” regularly to see family etc.
If that player does fulfil these criteria, they won’t pay UK tax on any of the Saudi income and would be free to bring back any of this income to the UK without triggering a UK tax liability.
Spend It Abroad
For players who aren’t UK domiciled (read not originally from the UK and haven’t been here for 15 years/decided to permanently settle here), there is a middle ground likely available.
For these players, the ability to claim the remittance basis of taxation in the UK might be a saving grace if the above circumstances are not met.
A UK tax return filed on the remittance basis means that tax is only paid on UK income and non-UK income that is brought into the UK. In other words, no tax would be paid on the Saudi income unless it is brought into/spent in the UK.
This is obviously very handy if a player isn’t ever intending to spend any of that Saudi money in the UK. However, if that’s the case and a player isn’t looking to come back to the UK, the chances are they’ll meet the split year conditions and won’t have to worry in any case (and can spend some of it in the UK if they so desire).
Even longer abroad…?
Any players looking to use their time in Saudi to unwind their image rights (and any other) companies without paying UK tax, would need to be outside the UK tax net (read not be UK tax resident) for 5 or 6 years to facilitate a tax free extraction of funds from a UK company (where those funds have been built up during a period of UK tax residence).
This article outlines the tax implications here and why perhaps a year in Saudi isn’t quite as good as it sounds.
We would stress however that tax residence and domicile are complex issues and all players should be getting bespoke tax advice before making any decisions.
We’re happy to provide that advice and should you wish to speak to us, please get in touch.