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For A Bankrupt Spanish Government, Lionel Messi’s USD 13 Million Tax Bill Is Not Enough.

Freemont Group
03 July, 2013

The economic crisis is now hitting Southern Europe most popular sport. 2 Months ago, the Spanish Minister of Finance Cristóbal Montoro, in his desperate attempt to blow up the state budget, requested all professional football players in Spain to make sure their tax returns have been filled in correctly and all taxes have been paid.

His request was addressed also to the ears of the Argentine born and raised soccer icon Lionel Messi and his father Jorge Horacio, both residents of Spain since 2000. Messi has paid an income tax of about USD 13 million for the period 2010-2011. But question marks arose about his earlier tax returns.

His local prosecutor now claims that more tax had to be paid in the period 2007-2009 and that the filed tax returns from that period are fraudulent. The outstanding amount (as calculated by the tax office) on tax to be paid and a fine on top of it could reach over USD 35 million. In theory, Messi could even face a jail sentence of six years!

So what is going on here?

In the sport world, it has been a common practice for many decades that famous athletes are being paid not only for their hard physical work on the field, but also for their name. The second payment, for the “brand”, is sometimes even higher than the regular salary.

As the brand is an intellectual property, it can be easily transferred (e.g. to a foreign entity located in a low tax country) and when properly structured, the incomes generated by that brand (called royalties) no longer have to appear on the tax return of the athlete.

This is a very well known and accepted behavior in the lucrative business called ‘football’, rather than something new or adventurous. David Beckham, Luís Figo, Dennis Bergkamp – they all did it and it would be probably more difficult to find an athlete who has not been making use of this possibility. As a matter of fact, when Beckham moved to Spain to play for Real Madrid, he even succeeded in having the Spanish income tax law rewritten in his favor!

So far the tax man agreed and approved. So far so good. But now the crisis came and governments are desperate to look for more income.

A dark grey shadow of possible tax evasion is being thrown upon the most popular football player in the world. Countries like Uruguay, Switzerland and Belize are being mentioned in one sentence with MessiÂ’s tax fraud but so far it is all just speculation. The desperation of empty pockets resulted in the tax office proposal for settlement. MessiÂ’s lawyers refused, and the court hearing is scheduled on September 17.

It looks like the amazing football player with the boyish look suddenly finds himself roughly awoken from his dream live into a cold, harsh reality. Lets hope that this universal treasure can continue to entertain billions of people worldwide and does not end up on the list of things that are destroyed under the pretence of the “common good” by arrogant bureaucrats and their inability to balance their budgets.

Lionel Messi came to Barcelona in 2000, at the age of 13. In the past decade, he became 4 times the football player of the world, leading Barcelona 6 times to winning the Spanish competition and 3 times the Champions League. In 2012 he rewrote the world football history by scoring 86 goals for his club and country. With a year income of USD 41 million, the 26 years old player is number 10 on the ForbesÂ’ list of the worldÂ’s best paid athletes.


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Freemont Group

Freemont Group is a comprehensive provider of fiduciary services, including corporate formation and administration, trust, fund formation, legal-and tax services. Contact: info@freemontgroup.com

 

 

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