Argentina rules and taxes third party ownership

Argentina rules and taxes third party ownership

FR

L'Argentine a adopté en janvier 2013 une règlementation financière très complète visant à rendre plus transparentes les opérations de transferts et à taxer fortement ces opérations. Sans interdire la tierce propriété de joueurs, cette règlementation impose aux clubs argentins de centraliser tous les paiements relatifs aux opérations portant sur des joueurs professionnels sur des comptes bancaires spécialement mis en place à cet effet et les rend responsables du paiement des taxes qui sont prélevées à la source. Un registre des tiers investisseurs et des agents est créé et tous les contrats y afférents doivent y être déclarés. L'avocat Rodrigo ORTEGA SANCHEZ, membre de l’AIAF, livre son analyse sur ce nouveau règlement.

 

EN

Argentina has published regulations designed to make professional football contracts more transparent, by outlawing third-party ownership and requiring clubs to conduct transfers through specially-established bank accounts, whereby the money will not be released until all information relating to that transfer has been recorded. Rodrigo ORTEGA SANCHEZ, an Abogado with Estudio Beccar Varela, explains the new regulations and how they apply to clubs based overseas.

In January, Argentina published new regulations that by requiring one club to own registration rights to a player, effectively outlawing third-party ownership. In a similar fashion to FIFA’s Transfer Matching System, the regulations require professional football clubs involved in selling and buying a player to enter detailed information into a central registry (see FIFA’s explanation of its system at www.fifa.com/aboutfifa/organisation/footballgovernance/transfermatchingsystem.html). However, in order to ensure that clubs comply, the system requires them to open special bank accounts into which money relating to player transfers will be paid. If the information doesn’t match, the transfer will not be approved and the money relating to the transfer will be witheld.
The Federal Administration of Public Revenue (AFIP) issued General Resolution N° 3432/2013 (GR 3432), which was published in the Official Gazette on 4 January 2013. The AFIP aims to make Argentinean football operations more transparent. By means of GR 3432, The AFIP established: 

  • a withholding regime regarding income tax on professional soccer player transfers and/or assignment of their economic rights; 
  • a registry of professional soccer investors; and 
  • a register of professional soccer player agents/representatives.    
  • The withholding regime created by GR 3432 applies to the income obtained by natural persons, undivided estates and Argentinean residents other than sports institutions (including out-of-contract professional football players), from:
  • transfer operations and/or total or partial, final or temporary, assignment of economic rights of professional football players that  are part of teams that belong to the first and second division of the Argentine League and that participate in tournaments organized by the Argentina Football Association (AFA); and 
  • negotiation of economic and federative rights performed on behalf of professional football players of teams that belong to the first and second division of the Argentine League that remain out-of-contract.

For tax purposes, GR 3432 states that football players’ economic and federative rights must belong exclusively to one sports club. The economic and federative rights of football players that are out-of-contract will remain temporarily owned by the last sports entity which owned those rights.
Thus, it should be noted that football players´ federative – or ‘ownership’ - rights belong exclusively to one club. Only the AFA´s affiliated clubs are authorized to register football players in official competitions. Therefore, when a club enrolls a particular player in its team, that club holds the player’s federative rights. 
Perhaps obviously, federative rights have economic content, which under the language of the rules are known as ‘economic rights arising from federative rights’ (Economic Rights). In simpler terms, this means the profit that the club will obtain in the event of transferring a particular player to another club. Although the economic and federative rights to an out-of-contract player remain temporarily owned by the last sports entity that owned them, they will not be able to capitalize on that temporary ownership under the terms of the rules, which state that if a player is out-of-contract, the federative rights won’t exist if another club wishes to purchase that player. For instance, the economic rights raised from the temporary or permanent transfer of a player won’t exist either. 
Moreover, GR 3432 states that the payments raised from professional football player transfers and/or assignment of their economic rights must be carried out through the clubs, who will act as withholding agents. After the withholding is practiced, the clubs must buy out any remaining federative or economic interest in the player – i.e they must pay the corresponding amounts to the natural persons, undivided estates and individuals other than sports institutions that have investments related to the economic rights of the football player who was subject of the transfer.
Likewise, all transactions must be performed through the banking system, via special bank accounts that each club must have. The information regime which clubs must use to record the professional football players that are part of the team at the end of each semester is maintained by the GR 3432, however a register for agents/representatives and for investors or soccer businessmen has been added.
In order to determine the amount to withhold, the withholding agent has to apply the following tax rates upon 90% of the total amount of the transaction:

  • Seventeen and a half percent (17.5%): applied to payments from sports entities to investors incorporated on the ‘Register of professional football player related investors’, i.e. companies or individuals that have held investments related to economic rights of the player that is the subject of the transaction. 
  • Thirty Five per cent (35%): applied to payments to investors that were not incorporated on the ‘Register of professional football player related investors’, or that having been incorporated, have not reported investments regarding the economic rights of the player that is the subject of the transaction.

By means of the GR 3432, the ‘Register of professional football player related investors’ and the ‘Registry of professional football player agents’ were created. The following individuals must register themselves in the ‘Register of professional football player related investors’: 

  • natural people, undivided estates and Argentinean residents, other than sports institutions, that have investments related to the economic rights of professional football players that are part of teams that belong to the first and second division of the tournaments organized by the AFA, as well as investments in football players that are hired by foreign clubs or that are out-of-contract; 
  • Out-of-contract players that hold their own their economic rights.

Regarding this matter, it is important to point out that the resolution only applies to professional players, ignoring the investments that natural people, undivided estates and other Argentinean residents hold in relation to amateurs or players that participate in tournaments from the third division (Primera “B” Metropolitana) and the amateur leagues. It is important to take this into consideration, due to the fact that nowadays investments regarding amateur football are constantly increasing, as professional clubs are keen to sign players at a younger age.

Moreover, all Argentinean residents that perform management activities regarding the following individuals must register in the ‘Registry of professional football player agents’: 

  • professional football players that participate in the First and Second Division tournaments organized by the AFA; 
  • football players that are hired by foreign clubs; and/or 
  • players that are out-of-contract.

The GR 3432 does not specify if it is aimed at applying to agents licensed by FIFA or to any person who performs activities related to a football player’s representation. In my opinion, only agents with a FIFA license could be a part of this Registry. This should be reflected in the regulation because, as is common knowledge, licensed agents only carry out 30% of international transfers of football players (see www.e-comlaw.com/world-sports-law-report/article_template.asp?Contents=Yes&from=wslr&ID=1507 for more information). However, it may be that the regulation has taken into consideration FIFA’s plan to require clubs to record any party acting in an international player transfer, and will therefore require any person involved in the transfer to be part of the Registry.
By means of this Registry, the player agents must report all the information regarding their clients, as well as provide all the documentation that supports said representation. Therefore, AFIP will have a dynamic database containing details on ‘managed’ players, the dates and amounts of their corresponding contracts.
Moreover, the GR 3432 presumes – with fiscal purposes - a referential value of the remuneration obtained by agents. For instance, it is presumed that their remuneration cannot be less than the 10% of the profit obtained from the value of the transfer and of what they receive from the clubs (income, bonuses, etc.).
Regarding the ‘Registry of professional football player agents’, it is important to remark that the Registry goes against the requirements established by the Football Agents Statute, due to the fact that it doesn’t require the agents to obtain a license from the AFA and that the Statute doesn’t allow ‘dual representation’ – i.e. it only allows the agents to charge their fee for one concept and not for both, as it is mentioned in the Resolution (players transferring price, and what they obtain from the clubs). 
Within this scope, agents cannot hold their client’s economic rights, as provided by Article 29 of FIFA’s Players Agents Regulations (available at www.fifa.com/mm/document/affederation/administration/51/55/18/players%5f...). At present, the regulation forces the clubs to inform the AFIP (through AFA) about who are the agents who managers the players of their team and by means of the new resolution, the information submitted by the agents is added. In case the agent doesn’t submit the information to AFIP, AFIP could cancel his tax ID number or apply other penalties.
Finally, I would like to remark that the GR3432 came into force on 4 January 2013. The obligation to record the data requested for the ‘Register of professional football player related investors’ and the ‘Registry of professional football player agents’ - regarding the investments and representation regarding contracts already in force by the time the resolution was published in the Official Gazette - can be fulfilled up to 28 February 2013. As regards the supporting documentation, that should be submitted in terms of both registers. The GR 3432 provides that the corresponding AFIP website allowing the clubs to record this information will be available on 1 March 2013. Consequently, the documentation regarding the informed contracts can be submitted up to 31 March 2013.

Rodrigo Ortega Sanchez, Abogado
Estudio Beccar Varela, Buenos Aires
rosanchez@ebv.com.ar

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