ITALY Trends and Developments Contributed by: Maurizio Marullo, Giorgio Vagnoni, Francesco Amoresano and Fausto Consolo, LAWP Studio legale e tributario
Restriction on artificial capital gains in Italian law Recently, several notable player transfer trans - actions have been scrutinised by Italian criminal and sports authorities, as they were found to be structured to artificially inflate player values and enhance the financials of football clubs. Authorities discovered that certain clubs unlaw - fully increased player values disproportionately in order to generate capital gains. These transactions typically occurred when the transfer payment was not made entirely in cash, but rather through player swaps or mixed deals in which part of the payment was made in cash and part via the transfer of another player’s rights. Engaging in such practices exposes clubs (and their management) to the risk of recording inac - curate accounting data in their financial state - ments, contravening Article 2423 of the Civil Code, which requires that “the financial state - ments shall be realised with clarity and shall give a true and fair view of the company’s financial position and results of operations for the relevant financial year.” Furthermore, the deliberate recording of inac - curate accounting data (including so-called arti - ficial capital gains) falls under Italian criminal law provisions such as: • false accounting (Article 2621 of the Italian Civil Code), which can result in up to five years’ imprisonment for directors, general managers, corporate accounting managers and auditors if the offence is committed to secure unlawful profit and is likely to mislead third parties; and
Capital Gains for Football Cubs as a Result of Player Trading Player trading as a revenue source for football clubs Players are one of the main assets for Italian football clubs, especially given the lack of extra revenues from infrastructure (eg, stadiums man - aged by clubs to host events even beyond match days) and given that sponsorship and TV rights revenues are not as high as in other markets (ie, the English and Spanish markets). For this reason, profitable player trading is vital for football clubs, as it helps them: (i) maintain financial sustainability in line with the require - ments imposed by the Italian Football Associa - tion (FIGC) and UEFA, and (ii) attract new players while keeping their squads competitive. To this end, clubs are increasingly seeking capi - tal gains, which are realised when the sale price of a player exceeds its net accounting value at the time of the transfer. The net accounting value of a player is deter - mined by the balance between: • the historical cost of a player (ie, the purchase price), and • the depreciation realised on the purchase price of a player from the date of acquisition to the date of transfer. Clubs can depreciate the cost of players’ sports performance rights – which is considered an intangible asset under Article 2426 of the Civil Code – on a regular basis over the entire dura - tion of the player’s contract (for example, if a player is bought for EUR30 million and signs a five-year deal, the club may depreciate the pur - chase price by EUR6 million for each financial year of the player’s deal term).
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