SPAIN Trends and Developments Contributed by: Álvaro Gómez de la Vega Jiménez, Jofre Sports Law
treaties that explicitly allocate taxing rights on capital gains from the sale of shares or immovable property, the Spain–Argentina convention leaves greater resid - ual power to the domestic law of each country for gains that are not expressly mentioned. The Spanish tax authorities took the view that, under this wording, Spain could treat the gain as arising from an asset economically connected with its territory, given that the federative rights had to be exercised in Spain and were necessary for the player to be registered with the Spanish federation. Spanish economic administrative tribunals had already shown an inclination to consider that the added value of a transfer is generated in the jurisdic - tion where the player will provide services and where the sporting rights will be exploited. The Audiencia Nacional effectively consolidated this line of reason - ing, confirming that Spain may tax the gain alongside the seller’s home country, subject to the operation of domestic rules on double taxation relief. For clubs in other countries with similar treaty clauses, the case is a warning that Spain might claim taxing rights even when the seller is clearly non resident and the nego - tiation and signing of the transfer agreement occur outside Spain. Practical impact on foreign clubs and risk of double taxation For foreign clubs transferring players to LaLiga, the Racing decision changes the risk calculus. The pos - sibility that Spain may issue an assessment several years after a transfer obliges clubs to consider long term exposure when they negotiate the price and structure of deals. If the club’s home jurisdiction does not fully recognise the Spanish tax as creditable, or if practical obstacles prevent the full utilisation of for - eign tax credits, the result may be economic double taxation. In addition, the administrative burden associated with audits, document requests and potential litiga - tion in Spain can be significant, especially for clubs that do not have a permanent presence in the country. Accounting teams may need to keep detailed records of past transfers involving Spanish clubs to answer queries from the Spanish authorities many years later. From a cash flow perspective, the prospect of hav -
ing to fund an unexpected tax bill in Spain may force clubs to adopt more conservative distribution policies and delay investments that depend on transfer pro - ceeds. It is also likely that market behaviour will adapt. Foreign clubs may gradually incorporate a “Spain premium” into their transfer valuations, increasing the requested fee or adjusting bonus structures to compensate for the potential Spanish tax. In competitive bidding sce - narios where several European leagues are interested in the same player, the additional friction created by the Spanish tax position might influence the seller’s preference towards other destinations, especially where tax outcomes appear more predictable. Contractual safeguards and negotiating dynamics In this context, detailed drafting becomes a critical tool to allocate tax risks between the parties. Trans - fer agreements may include gross up clauses, under which the buyer agrees to increase payments to keep the seller whole if a particular tax is triggered, or tax indemnity provisions that specify which party bears any additional assessments arising from a given transaction. These clauses can be heavily negoti - ated because Spanish clubs, already constrained by LaLiga’s squad cost limit, are wary of assuming open ended obligations that could crystallise years later. The Racing case also encourages parties to address co-operation and information sharing obligations explicitly. A selling club that receives a notice from the Spanish authorities may need documents held by the Spanish club, such as the contract filed with the league or internal calculations of amortisation, to support its position. Conversely, Spanish clubs may wish to ensure that the selling club provides timely information about its own tax audits or appeals that could have consequences for future cross border dealings. In more sophisticated structures involving investment funds, third party ownership restrictions and sell on percentages, the allocation of Spanish tax risk becomes even more complex, requiring careful alignment of interests among multiple stakeholders. LaLiga’s financial control and the squad cost limit While tax authorities and courts focus on public rev - enues, LaLiga’s economic control regulations seek to
313 CHAMBERS.COM
Powered by FlippingBook