Taxing End-of-Contract Compensation in Spain: Courts vs Tax Authorities
In 2019, the Spanish Supreme Court recognised professional athletes' right to end-of-contract compensation under Article 49.1.c) of the Workers' Statute, ending years of inconsistent case law. However, this landmark ruling created a new problem: should such compensation be exempt from personal income tax? This article examines the conflicting positions of the Spanish courts, which have held that the compensation falls within the tax exemption for severance payments under Article 7.e) of Law 35/2006, and the tax authorities, which maintain that it constitutes taxable income subject to withholding. It explores the practical consequences for clubs and athletes navigating this unresolved dispute.
Article Outline:
- Background – Employment Relationships of Professional Athletes
- The Supreme Court's Departs from Earlier Reasoning
- The problem of tax treatment for Athletes: Courts vs Tax Authorities
- Opposing Views
- The added problem of its inclusion in the remuneration of professional athletes
- Clubs Response to the 2019 Ruling
- Sample Contractual Clauses
- Regulatory framework
- Case law in favour of exemption
- The administrative criterion: subject to personal income tax
- Practical consequences for professional sport
- Doctrinal debate
- Illustrative numerical example
- Proposals for new legislation
To continue reading or watching login or register here
Already a member? Sign in
Get access to all of the expert analysis and commentary at LawInSport including articles, webinars, conference videos and podcast transcripts. Find out more here.
Related Articles
- What clubs, players & agents need to know about HMRC’s new guidance on football agents’ fees and dual representation
- Tax changes for elite athletes presently in Italy: What you need to know (Part 1)
- Tax on transfers to Spanish clubs: Supreme Court ruling in Neymar & James Rodríguez cases
- Part-time officials, full-time implications – Analysis of the HMRC v PGMOL cases
- Sprinkling of gold dust: Tax implications of Bryan Robson’s ambassador agreements
- Changes to the tax treatment of agent payments in football in the Netherlands
Written by
Álvaro Gómez de la Vega
Partner at Jofre Sports Law
Álvaro is a partner in a legal boutique based in Spain and he is an expert in sports litigation and contract drafting.
He advises and represents a great variety of clients like agents, clubs, coaches, sport managers and professional athletes in all sort of matters: employment agreements, sponsorship, transfer agreements, disciplinary issues, tax planning among others.
Álvaro is highly trained, fluent in several languages and experienced in litigation processes (national and international), including trial and alternative dispute resolution. He has been the legal manager of top clubs in Spain like Málaga CF and RCD Espanyol de Barcelona in addition with his experience in FIFA's Players Status Department.
