Professional footballers pay regular taxes as employees of a football club. Although their salary is by no means the same as that of an average employee, the same tax conditions apply to them. Their personal tax rate is then well above the average, so that professional footballers in Germany pay up to 45 % in taxes. However, they also earn a lot of money with advertising revenue. But professional footballers can save taxes to a considerable extent. Indeed, these advertising revenues constitute income from commercial activities, which they usually generate in the context of a sole proprietorship. If they now start this commercial activity at a time when their awareness has already increased, then their personal rights have also reached a high value. They then contribute these personal rights to their individual company in order to write off them annually. Thus, they significantly reduce their taxable profit. In this way, professional footballers save taxes just as much as influencers. The BFH judges: no offside!

Professional footballers earn a lot, a lot of money. By the way, they also play football and advertise for companies that want to gain advantages for the sale of their own products with their awareness, success and recognition value. But where money flows, the Treasury is usually very close. Therefore, in this article we want to talk about what taxes professional footballers have to expect and how they can optimize taxation.

Professional footballers and taxes – employment contract with a football club

2.1. Professional footballers and taxes: working for a domestic football club

First of all, a professional footballer starts his career when he signs a contract with a football club. Because this justifies employment law the entry into an employee relationship. For example, the professional footballer undertakes to provide his sports services to the club for a certain salary. So the professional footballer also gets an actually quite normal salary, although this may not apply to the amount of the amount. Because professional footballers can earn in a renowned football club quite several million euros annually.

Since this represents income from a non-self-employment from a tax point of view, professional footballers also normally pay taxes on it. They are therefore also entitled to the deduction of advertising costs. At most, the tax rate and the associated level of taxes is exceptional for professional footballers. Because if they earn an enormous amount from their football club, then this also has the corresponding consequences in their taxation. Therefore, personal tax rates at the top tax rate of 45 % are quite possible for celebrated professional footballers. For example, with an annual salary of EUR 10,000,000, this leads to a tax of EUR 4,500,000.

2.2. Professional footballers and taxes: working for a foreign football club

Because professional footballers can also be active at football clubs across their own borders, you may also have to observe international tax law when taxing them. However, in such a case, professional footballers usually move their residence to the country where the club for which they are active is established. There they also perform their sporting services, for which they receive their salary. So they are also regularly taxed there without restriction. Although there may be a tax liability in their home country, this is usually only a limited tax liability affecting domestic income.

But now it is also the case that in the name of their success and their notoriety radiant professional footballers like to polish up the image of companies. In particular, large brand groups such as the automotive industry or sportswear industry like to rely on the appeal of professional footballers to promote their products. In return, professional footballers sometimes receive considerable compensation for this. This is due in particular to their familiarity. Thus, their recognition value also plays an outstanding role here. Thus, when allocating revenues, the importance of their actual activity within the framework of the advertising contract clearly falls into the background behind the provision of their personal rights.

3.2. Professional footballers and taxes: advertising revenue in the context of a sole proprietorship

But what kind of revenue are these advertising contracts? Finally, the answer to this simple question is of enormous relevance when it comes to the taxation of advertising revenue. The answer to this question is to classify advertising revenue that an individual provides as income from commercial activity within a sole proprietorship. This allows the deduction of expenses related to the achievement of income. In the case of an advertising contract, a professional footballer can, for example, tax deduct travel expenses or costs for an office with employees who coordinate these advertising activities. However, these costs are usually only a small part compared to the amount of advertising revenue. Nominal deductions from the taxable profit can therefore hardly accompany this. Nevertheless, it is possible for professional footballers to save an enormous amount of taxes on these incomes.

Professional footballers and taxes: Depreciation of intangible assets

Because the personal rights make up a large part of the reason why the advertising companies hire a professional footballer as an advertising medium. For this, one must know that one can bring personal rights as intangible assets into the individual company. This can be done tax-free. In addition, these intangible assets, like all assets, can be depreciated annually. Therefore, the higher the value of the intangible assets deposited, the higher the depreciation and thus the reduction in taxable income.

What is also important to note is that the duration over which the depreciation on the intangible assets takes place also corresponds to the period over which the professional footballer essentially plans to generate advertising revenue of a significant size. As soon as his active career as an athlete ends, a decline in his advertising revenue is to be expected. If he estimates a too short period of time, then there are less taxes in the period. But later the volume for depreciation is used up, so that the taxes are high towards the end of the sporting career. If one chooses too long a period, then in later times when no more advertising contracts are concluded, assets remain in the intangible assets and thus expire unused.

3.4. Professional footballers and taxes: Evaluation of personal rights

The crucial question now is with what value you can bring the personal rights into the individual company. It is of course advantageous for control purposes if this value is as high as possible. But to justify this, the notoriety of a professional footballer must have reached a certain degree. Therefore, it is worthwhile for professional footballers to wait until their awareness has increased to such an extent that the associated personal rights can be brought into the individual company as intangible assets with a high value. Looking at the amount of advertising revenue that can be achieved at the present time, subtract the share of it that you provide as a personal service, which is often only a small percentage (about 10%), and multiply this by a factor that corresponds to the expected return (also about 10%).

Assuming that an average career of a professional footballer is about ten years, this leads to an optimal use of the depreciation of personal rights over this period. Professional footballers can save up to 90% on depreciation when taxing their advertising revenue. The actual expenses of course reduce the taxable share even further.

3.5. Significance of the BFH judgment for the taxes of professional footballers

What sounds like a desire to optimize the taxes of professional footballers based on advertising revenue has a solid legal foundation. Recently, the Federal Finance Court ruled in a general judgment on the tax significance of personal rights that they flow as intangible assets into a sole proprietorship. The verdict even demands it. In addition, the judgment confirms the treatment of these intangible assets in the depreciation.

But it is also clear that you have to bring the personal rights into the sole proprietorship at the time when you start to earn income from them by marketing the personal rights, for example through advertising. Therefore, it is more advantageous for a prospective professional footballer to wait to conclude advertising contracts until his awareness establishes the highest possible value of his personal rights.

Why do influencers pay less taxes?

4th professional footballer and tax – national player at the DFB

4.1. DFB model employment contract: great honor – and more taxes?

A special feature is, however, if the DFB wants to sign a professional footballer as a national player. Which of course is a great honor for a professional footballer, but can also have other consequences. A professional footballer now also works for the DFB. This commitment corresponds to a further employee relationship. But the model employment contract, which a professional footballer enters into with the DFB as a national player, usually also contains another tax-relevant clause. It concerns its participation in the advertising revenue generated by DFB in this respect. This is because the DFB can generate its own advertising revenue with its team and at least partially involve the players it commits. However, a professional footballer, even without having signed his own advertising contract, is subject to commercial activity as a sole proprietor. And here too, the Bundesfinanzhof made a separate judgment in 2012, which represents this view.

If a professional footballer has already entered into his own advertising contracts and has contributed his personal rights to his sole proprietorship in order to use their depreciation as a benefit in his taxes, this may not have a significant impact. There is simply a proportional increase in taxes. But if a still young talent heeds our above-described advice and waits with the conclusion of his first advertising contract until his awareness gives his personal rights a maximum value, then the DFB contract with the clauses for participation in the advertising revenue should be treated with caution.

4.2. Solutions for young talents

Since the professional footballer also receives income from commercial activity in this context, he must then assess his personal rights from that point on and contribute them to his individual company in accordance with the first-mentioned BFH judgment. But at this early stage in the sporting career, this may be less beneficial in the taxes a professional footballer pays on these revenues than waiting until the value of personal rights reaches an optimal level. Only then should they be brought into the individual company in order to market them tax-optimized as part of advertising services.

Alternatively, a professional footballer can also waive a participation in the DFB’s advertising revenue – at least for the time being. In fact, the second-mentioned judgment differentiates in tax terms whether a professional footballer receives compensation only in the context of his work as a national player at the DFB, or whether he also participates in its advertising revenue. Of course, you can later adjust the model employment contract, if you also achieve advertising income yourself, to the extent that you also have a share in those of the DFB.