Податкове планування доходів гравців професійної спортивної команди
Автор: Алексей Дидковский, Алексей Колчанов, Алексей Хомяков, Константин Соляр, Павел Однокоз
Джерело: Джерело: Global Sports Law and Taxation Reports. – 2012. – Вересень. – с.50-54

Статтю можна прочитати нижче мовою оригіналу.

Ukraine: Tax planning for incoming professional team sports player


Ukrainian law provides for various structuring opportunities for transferring the foreign football players to Ukrainian clubs. Despite a certain ambiguity of Ukrainian regulations, the tax costs stemming from the transfer may be mitigated or significantly reduced, if properly structured. The diversity of tax planning opportunities depends on the goals of the parties. Depending on the transfer amount and ratio payable to the player and/or the foreign club, the transfer may be arranged through an employment scheme or more sophisticated tax structures, such as dividends/royalty options.


The transfer of professional team sports players, especially football and basketball, has to be considered both from tax and legal perspectives in Ukraine. This article generally describes the most applicable options of structuring foreign sports players' transfers.[1] EURO 2012 boosted the Ukrainian football transfer market, which increased the necessity to properly set-up tax structuring for incoming football players. With the view to the noted trends, we will focus on football transfers hereafter. However, the below schemes could be easily adapted to the transfer of

other sports players as well. Special attention should be given to the rules governing the transfer of sportspersons. Particularly, FIFA regulations on the status and transfer of football players, the Football Federation of Ukraine transfer regulations, etc. Such regulations contain specific provisions regarding arranging relationships between clubs and sportspersons in the transfer process. The relevant provisions became a starting point in the process of tax planning and structuring the deals.

Option 1: employment contract

General description

Structuring relations between a sports club and a sportsman through the employment is a rather traditional option. As described on chart 1 (Option 1), entering into the "transfer" contract between two sports clubs is followed by termination of the sportsman's employment with his/her "old" club and signing a new employment agreement with the Ukrainian club.

Under the "transfer" contract, the Ukrainian club makes payments to a foreign club, while a football player receives his/her remuneration through the employment arrangement with the Ukrainian club.

Tax implications for the clubs

Withholding tax ("WHT")

From the Ukrainian law perspective, transfer of money from a Ukrainian football club to a foreign club is treated as non—resident's Ukrainian—sourced income. Under the general rule, such income is subject to 15% WHT. However, if a relevant double tax treaty ("DTT") provides for tax relief, the Ukrainian football club will not be required to withhold the tax. Most of DTTs signed by Ukraine allow for such relief.

Corporate profits tax ("CPT")

The Ukrainian tax law is generally silent on the qualification of the transfer rights for CPT purposes. Based on the existing definitions, the transfer rights may be treated as services or intangible assets. However, irrespective of this ambiguity, the transfer amount should be generally deductible for the Ukrainian football club, if the transfer price is properly justified and there is a business rationale regarding the transfer. Apart from that, the salary payable to the incoming football player under his/her employment agreement should be deductible for the Ukrainian club.

Value Added Tax ("VAT")

Under the fair interpretation of the law, the payment for the "transfer" rights is likely to be treated as a supply of VAT—able services. Such treatment generally results in Ukrainian 20% VAT to be payable by the Ukrainian football club under the rules of statutory reverse—charge mechanism.

Tax implications for the players

The salary of incoming football players received from the Ukrainian sport club is subject to personal income tax ("PIT") and the mandatory social contribution ("Social tax"), which we describe below.


The PIT rate is 15% (for the part of the salary below € 1,056) and 17% (for the part of the salary above € 1,056) and applies irrespective of the individual's tax residency status. PIT is a tax charged on individuals' incomes and does not apply to legal entities—employers. The employers only act as tax agents.

Social tax

Social tax is paid both by the employer and the employee at the below rates.

— Payable by employer and at its expense. The rates vary from 36.76% to 49.7% depending on type of business and accidents' risk in a particular economic area. However, the Social tax is capped at a certain statutory level (currently € 1,844) and any monthly payment above that threshold is not taxable.

Chart 1. Option 1: employment contract

— Payable by employee and at his/her expense.

The employer is also required to withhold the Social tax charged to the employee. Similarly to the employer's liability, the Social tax is capped for the employee as well. The Social tax varies from 2% to 6.1% depending on the industry. A monthly salary exceeding the established threshold (currently € 1,844) will not be taxable.


This option reflects the most "straightforward" approach to structuring relations between football clubs and players and entails quite a cumbersome tax exposure.

Option 2: royalty arrangement

General description

According to this option, the transfer contract between sports clubs and sportsper—sons would contain a provision stipulating a right to use the football player's image rights, trademark or other intellectual property (if applicable) by the Ukrainian club. The Ukrainian club proportionally pays royalties to the foreign club and a sportsman for the use of this intellectual property. Along with the royalties, the Ukrainian club pays remuneration to a sportsman under an employment agreement.

Chart 2, Option 2: royalty arrangement.

Chart 3. Option 3: dividends arrangement.

Tax implications for the Ukrainian club

Upon payment of the royalty to a foreign club, the Ulaainian club should withhold relevant amounts of 15% WHT, unless a DTT between Ukraine and the jurisdiction of the foreign club provides for a tax relief. Also, the Beneficial Ownership Requirement applies in this case.

Beneficial Ownership Requirement

The Ukrainian Tax Code, dated 2 December 2010, introduced certain restrictions on the use of the DTTs' benefits. In particular, the DTT benefits may be available only to beneficial owners of Ukrainian—sourced income. Unfortunately, the concept of a beneficial owner is rather underdeveloped in the Ukraine, which creates uncertainty in application of DTTs. Lack of experience in dealing with the beneficial ownership concept may result in ambiguous tax treatment of royalty payments. Therefore, this option should be carefully structured from the legal perspective and royalty recipients should be ready to provide evidence that they are beneficial owners of these payments.

Special restrictions apply to the deductibility of royalties paid to nonresidents. Particularly, royalties paid to non—residents are deductible up to 4% of the prior year sales. Royalties are non—deductible if they are paid to non—resident companies located in an offshore jurisdiction (there is a statutory fist of such jurisdictions), to the person, who is not a beneficial owner of such royalties etc. This 4% deductibility limitation applies only to the Ukrainian club.

Tax implications for a sportsman

The Ukrainian club, serving as a tax agent, should withhold relevant amounts of PIT from the royalties paid to a sportsman. Royalty paid to a sportsman is subject to 15—17% PIT. Non—resident sportsmen may enjoy DTT benefits.


The main advantage of this option is that the royalty is subject to PIT only and does not trigger Social tax. The amount of WHT or PIT could be reduced if the relevant DTT provides for a tax relief (reduced tax rate or exemption). However, this option requires the parties to be prepared to prove that they are beneficial owners of the Ukrainian—sourced income.

Option 3: dividends arrangement

General description

For the purpose of this option, a special purpose company ("SPV") should be incorporated in a foreign jurisdiction with favorable tax regime (e.g. Cyprus).

As a first step, rights for the player are contributed into the charter capital of the SPV by the foreign club/football player. In exchange for these rights, the foreign club and football player receive corporate rights in tile SPV in certain proportions. Then the SPV grants a portion of these rights to the Ukrainian football club for the agreed compensation. The consideration payable to the SPV by the Ula—ainian club will be used for dividends distribution by the SPV to its shareholders — the club and the player.

Also, it will be necessary to sign the employment agreement between the Ukrainian club and the football player to arrange their relations from a Ukrainian perspective. The remuneration payable under the employment agreement could be nominal, while the main income of a sportsperson will be generated at the level of the SPV.

Tax implications for the Ukrainian club


The payment to the SPV by the Ukrainian club is generally subject to 15% WHT. However, the WHT is not paid if the relevant double tax treaty provides for tax relief. For instance, under the Ukraine—Cyprus DTT, such payments are exempt from taxation in the Ukraine.


Ukrainian CPT and VAT implications for the Ukrainian club in respect of payment to the SPV would be the same as in Option 1 above.

Tax implications for the sportsman

A non—resident player should not be subject to Ukrainian tax in respect of dividends received from the SPV. The nominal remuneration received by the player from the Ukrainian club under the employment agreement is subject to PIT and Social tax under the general rules (as described in Option 1 above).

As a separate note, non—resident individuals are subject to PIT exclusively with respect to their Ukrainian—sourced income. At the same time, residents of the Ukraine are subject to PIT based on their "worldwide" income, i.e. the income originating both (1) from the Ukraine and (2) from any other foreign country. Considering the above, should a sportsman qualify as a Ukrainian tax resident, dividends received from the SPV shall be taxable in the Ukraine.

The tax residency may be generally defined using the following criteria:

— An individual is considered to be a Ukrainian tax resident if he/she has a permanent residence in the Ukraine ("domicile test").

— If an individual has a permanent residence in more than one country, he/she is considered to be a tax resident in the country where he/she has the closest personal and economic ties ("centre of vital interests test").

— If it is impossible to determine the country of residence using either the domicile or the centre of vital interests test, the individual is considered to be a Ukrainian tax resident if he/she is present in the Ukraine for at least 183 days (including the days of arrival and departure), cumulatively, during a calendar year ("183—day test").

— If the tax residency cannot be determined on the basis of the 183—day test, the individual is considered to be a Ukrainian tax resident if he/she has the Ukrainian citizenship ("citizenship test")

Also, tax legislation stipulates the so—called "self—recognition" procedure, whereby a sufficient legal basis for defining the individual as a tax resident of the Ukraine is his/her registering as a self—employed person (i.e. private entrepreneur) on the territory of the Ukraine or declaring the Ukraine as his/her primary place of residence.

As a matter of practice, the Ukrainian tax authorities tend to follow quite a formalis—tic approach when it comes to tax residency issues. The local tax authorities mostly tend to apply the "183—day test".


Option 3 seems to be the most tax efficient for a football player from the Ukrainian perspective because Ukrainian taxes are applicable only to his/her nominal salary, while the prevailing amount of the compensation (i.e. dividends) is received outside Ukraine and, subject to careful structuring, formally may not fall under the scope of Ukrainian tax.

[1] Despite the practical insight provided herein, the tax implications concerned are of the descriptive character only. The authors assume no liability for any application of the relevant tax planning options without prior consultations and consideration of specific circumstances of the case. Their analysis in this article is limited to the laws of Ukraine only and they assume that no foreign law affects any of the conclusions