Why are players moving to Serie A?
With Christian Eriksen and Ashley Young joining Aaron Ramsey and Romelu Lukaku in a growing trend of Premier League players joining Serie A clubs, I look at why a move to Italy has become more common.
The Italian Rules
As you might have guessed, one of the main reasons is tax! There are two major tax breaks available to players heading over to Serie A. These have been introduced to attract inbound workers and high net worth individuals to Italy. Clearly, footballers are both!
On 1 January 2017, the Italian authorities introduced the ‘flat tax’ regime. Under these rules, individuals moving to Italy may pay €100k and only be taxed on their Italian income.
On 1 January 2020, the Italian government introduced a regime to attract inbound workers. This allows an exemption to tax on 50% of the employment income of an inbound footballer (it’s actually more for other professions) for 5 years (with potential further benefits for another 5, subject to conditions).
To benefit from the inbound workers regime, players must commit to Italian tax residency for at least 2 tax periods. It would not, therefore, be applicable to loan moves. Those on loan could, however, benefit from the flat tax regime (subject to restrictions for any previous Italian tax residency).
The move from the UK and opportunity it creates
It is true that a similar regime to the ‘flat tax’ is offered in the UK due to our non-domicile rules. Non-UK domiciled players (broadly players not originally from the UK) can claim the remittance basis of taxation, such that they only pay tax in the UK on their UK income (as long as foreign income and gains are kept outside of the UK), but no-one speaks about players coming to the UK for the tax-breaks…
The difference here is the dovetailing of a career in the UK and then heading to Italy and benefiting from the flat tax regime. The UK is the only major football nation where Image Rights are recognised and a generally accepted practice. As discussed in my previous blog, players can therefore build up funds earnt from commercial activity in their image rights companies and pay corporation tax at 19%. This builds up quite a ‘pot’ of funds, which we advise players to accumulate in the company as a retirement fund.
However, whilst much more tax efficient than earning the income personally, there are still costs of extracting money from the company to be used personally; whether you wind the company up and claim Entrepreneurs’ Relief at 10%, draw down via dividends, take a salary, or otherwise. If you move to Serie A, become non-UK resident and take that money out by way of a UK dividend whilst in Italy, this can be extracted for a flat fee of €100,000. Players of this stature might have £5m+ of funds in their image rights company, which makes the % tax on extraction closer to 2%, and Italy a very attractive move!
Furthermore, assuming you are playing in the Champions League/Europa League, an apportionment of your salary from your Italian club can be made such that you don’t pay tax in Italy on income attributed to away games in other jurisdictions, akin to the UK’s Overseas Workday Relief (a blog on said underused relief is coming soon).
The other option, of course, is to simply claim the inbound worker regime and suffer 50% less tax on your 5-year contract, not the worst Plan B!
Whilst both cakes are beautiful, you can’t eat both and must choose one of the regimes to benefit from on arrival. Either way, don’t be surprised if Inter Milan, Juventus and the rest attract more players from the Premier League over the summer thanks to the Italian authorities and their now significantly increased net spending power. Likewise, don’t be surprised if the accounts of the Image Rights Companies owned by Eriksen, Ramsey, Lukaku and Young have significantly less assets in future filings.
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