Some comments about the tax qualification of the remuneration received by sports agents, with a focus on football agents.

Legislative and regulatory changes over the last years to the provisions governing sports agents have posed interpretative issues on the civil qualification of the sports agents’ activities. Such uncertainties have also raised concerns about the tax treatment of agents’ fees, usually categorized as income from self-employment, that recently entailed many tax inspections from the Italian Revenue Agency resulting in administrative liabilities for “unfaithful” tax returns. More recently, the Council of Ministers, on 24 November 2020, approved the Draft Legislative Decree implementing article 6 of the Delegation Law no. 86 of 8 August 2019, which provides for a renewed and comprehensive regulatory framework for sports agents’ activities in Italy, currently embodied by the Decree of the Italian Prime Minister issued on 23 March 2018 and the Regulations approved by the National Council of the Italian National Olympic Committee on 14 May 2020 and the Federal Council of the Italian Football Federation on 4 December 2020.

Under the (new) bill, the agent is defined[1] as the person who, in the execution of a representation mandate, put into contact two or more contracting parties operating in the context of a discipline recognized by the Italian National Olympic Committee or the International Olympic Committee, for the purposes of (i) concluding, terminating and transferring the player’s relevant employment agreement, (ii) dealing with the player’s transfer agreement and (iii) managing the player’s membership in a national professional sports association, “providing professional assistance and consultancy services, mediation”. The new framework seems to connect the sports agents’ activity to the category of mediators (art. 1754 of the Italian Civil Code), intended as someone who liaises with two or more parties to settle an agreement but without taking care of the particular interests of either of them, not linked to either parties by any relationship of collaboration, dependence or representation. However, insofar sports agents would only be allowed to operate in the execution of a representation mandate with “no more than two parties assisted by him”[2], the activity carried out could, at most, represent an “atypical” form of mediation (distinguishable in the figure of the business finder), based on a written agreement even only about one of the interested parties (unilateral mediation). Consequently, agents’ activity would be attributable to the category of commercial entrepreneurs in the exercise of an “intermediary activity in the circulation of goods” (art. 2195, par. 1, number 2 of the Italian Civil Code), insomuch as the cost of players’ acquisition represents – from an accounting point of view – an intangible asset in the financial statements of football clubs, subject to annual amortization throughout the players’ contract.

The remuneration paid to sports agents would be therefore qualified as business income (art. 55 et seq. of Presidential Decree no. 917/86, also “Income Tax Act”), requiring that the recognition of positive and negative items of income for tax purposes (Imposta sul Reddito delle Persone Fisiche / IRPEF) – computed at progressive tax rates from 23% to 43% plus local surcharges – would take place on an “accrual basis” rather than on a “cash basis”, as it would have been in the case of self-employment income from consultancy activity. On the fees paid to sports agents, football clubs would be required to apply a withholding tax of 23% on 50% of the gross remuneration or a rate of 23% on 20% of it if agents make use of employees or third parties in their activity (art. 25-bis of Presidential Decree no. 600/73, also “Italian Tax Assessment Act”). Likewise, in the case of non-resident sports agents, the remuneration would be subject to taxation in Italy only if the activity is regularly carried out through a fixed base. Additionally, the ascertainment of a commercial activity could result, to some extent, also in the taxation of income for regional business tax purposes (Imposta Regionale sulle Attività Produttive / IRAP), which rate varies from region to region but usually around 3,9%. The Draft Legislative Decree is therefore intended to clarify neither the interpretative issues about the civil qualification of sports agents’ activity nor the tax treatment of the corresponding remuneration, which, historically, was categorized as self-employment income (art. 53 et seq. of the Income Tax Act) for the provision of professional consultancy services, requiring the application of a withholding tax of 20% (art. 25 of the Italian Tax Assessment Act).

Considering that the legislative process is still ongoing, it would be welcome if the legislator provided a clearer definition of the sports agents’ activities, delimiting the boundaries between the services of consultancy and mediation as well as clearing the field from previous guidelines of administrative practice (i.e., Circular No. 24/1983 of the Italian Revenue Agency). Further comments will be shared as soon as the new regulations are converted into law.

[1] Art. 3, paragraph 1.

[2] Art. 5, paragraph 3.

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