The Italian football industry and the tax implications of the new FIFA Football Agents Regulations

The new rules aim to resolve tax investigations into player-related fringe benefits. Dual agency commissions still under potential tax scrutiny

With the approval of the Football Agent Regulations on 16 December 2002, FIFA adopted new rules governing the activities of agents in the international transfer system. As set out in the below, the introduction of the FIFA Football Agents Regulations (“FFAR”) will bring about significant changes for all individuals and entities involved in the football industry, who will need to consider the potential impact of the new rules on their activities. The entry into force of the FFAR takes place in two stages, with a transitional period between the first and second phases. On 9 January, the general provisions concerning the granting of the license required for the provision of football agent services entered into force, while on 1 October 2023, all other provisions will take place, including – among others – the obligation to carry out the activity only by agents who hold an official FIFA license, the introduction of a cap on commissions and restrictions on multiple representations in order to avoid conflicts of interest.

In particular, the FFAR regulates agents’ activities in connection with an international transfer, from one club to another affiliated with a different member association. Instead, in the case of national transfers or assistance in connection with the conclusion, termination or renewal of an employment contract, the activities of agents will be regulated by national member associations (such as the Italian Football Federation – FIGC), which must implement regulations in line with the FFAR by 30 September 2023.

The main new features of the FFAR

FIFA’s reform includes several innovative aspects aimed at better regulating the football agents’ activity. The main changes are as follows:

1) (Re)introduction of the FIFA football agent qualification exam

Those wishing to practice the football agent’s activity are required to pass an exam designed to assess their knowledge of international regulations.

Exemptions will be granted to those who were licensed under the previous FIFA regulations of 1991, 1995, 2001 and 2008 (i.e., before the start of the deregulation period in 2015) or who are already licensed as agents under the regulations of national member associations that are “equivalent” to FIFA.

2) Recognition of a global licensing system

Only natural persons holding a FIFA license will be able to act as football agents or approach potential clients to offer their services (the term “agent” is reintroduced instead of “intermediary”); agents’ agencies will not be able to obtain a license, although (individual) agents will be able to carry out their activities through a company while retaining any personal liability that may arise from carrying out their activities.

All agents will also be required to undergo continuous professional training to remain licensed.

3) Introduction of a cap on fees in order to achieve greater financial transparency

The new regulations provide for a cap on the fees that a qualified person may receive for the provision of Football Agent Services, defined by the FFAR as “football-related services performed for or on behalf of a Client, including any negotiation, communication relating or preparatory to the same, or other related activity, with the purpose, objective and/or intention of concluding a Transaction”. The service fee cap varies depending on whether the agent is involved in the transaction on behalf of the player/coach (Individual) and/or the purchasing club (Engaging entity) or the selling club (Releasing entity).

If the representation is for the benefit of the player/coach or the Engaging entity, the commission paid to the agent may not exceed a certain percentage of the gross annual remuneration (which includes base salary, any sign-on fee, and any amount payable if certain conditions are fulfilled, as a loyalty or performance bonus) negotiated in the employment contract: 5% up to USD 200,000 and 3% on the part exceeding this limit. In the case of a dual representation (i.e., activities performed for the benefit of the player/coach and the Engaging entity), the maximum commission payable to the football agent will take into account both of the above limits and will increase to 10% for the portion of the gross annual remuneration up to USD 200,000 and 6% for the portion in excess thereof. The new regulations stipulate that the commission must be paid after the close of the transfer window, in quarterly instalments throughout the duration of the negotiated employment contract. In addition, the right to receive the fees arises if the club is solvent in respect of the payment of the player’s wages, otherwise nothing is due to the agent (in proportion to the unpaid wages).

However, should the activity be carried out for the benefit of the Releasing entity, the agent’s fees will be capped at 10% of the transfer compensation. The calculation of the transfer compensation may not include any sell-on fee. As regards payment, this is made after collecting the consideration owed to the client.

With regard to the introduction of maximum service fees payable to a football agent, in the author’s opinion, the provision of a higher return for the assistance to a Releasing Entity could create an incentive for agents to carry out their activities (primarily) for the benefit of the latter, rather than for the benefit of the players/coaches or the Engaging entity. This could result in a double penalty: for the players/coaches, by limiting the choice of agents available to assist them, and for the agents themselves, by reducing the taxable income on which their remuneration is calculated. This is one of the reasons why many agents and their associations have widely criticized FIFA’s reform. They have complained that they were not involved in the drafting of the new regulations, given their primary role as stakeholders in the world of football.

4) Limitation of multiple representation agreements to ensure the integrity of the transfer system and to avoid conflicts of interest

A football agent may only provide professional services to one of the parties involved in a transfer, except in the case of a permitted dual representation (i.e., player/coach and the Engaging entity) with the explicit written consent given by both parties. Instead, acting in the joint interest of (i) the player/coach and the Releasing entity, (ii) the Engaging entity and the Releasing entity, or (iii) all parties involved in the transaction at the same time (player/coach, Engaging entity and Releasing entity) is prohibited. In addition, before entering into an agency agreement with a player or coach, the football agent shall be obliged to inform the Individual in writing of the possibility of taking independent legal advice and shall obtain written confirmation of the decision to take (or not to take) such advice. The representation agreements between a football agent and a player/coach will be valid for a maximum period of two years and may not contain automatic renewal clauses; on the other hand, the agreements between an agent and a club (Engaging or Releasing entity) do not have the maximum duration and several representation agreements may also be signed with the same clubs provided that they relate to different transactions.

Therefore, it cannot be ruled out that disputes between agents and clubs will arise due to changes to the rights and obligations of the parties in cases of multiple representations.

5) Introduction of a Clearing House (‘FIFA Clearing House’) for the payment of commissions to agents

Following the authorization received from the French Banking Commission in September 2023, the FIFA Clearing House will be able to act as a payment institution and, more generally, will be responsible for centralizing, processing and automating payments between clubs (such as training compensation or the payment of the solidarity contribution) and football agents’ commissions. However, until the Clearing House is fully operational, payments will continue to be made directly between clients and football agents.

FIFA’s aim with this measure is to ensure full transparency regarding the fees paid to agents and the real beneficiaries of these fees.

The investigation by the Italian tax authorities into the payment of commissions to football agents and the FFAR’s potential impact on fringe benefits

From a tax point of view, the question arises as to how FIFA’s rules will affect the payment of agents’ fees and their possible qualification in tax liability for the players (taxable fringe benefits).

This is a matter of concern raised by the Italian tax authorities following an in-depth investigation which identified a significant number of invoices issued by agents to clubs for the provision of football-related services (e.g., the conclusion, termination or renewal of an employment contract). It was argued that, given the specific employment relationship between a club and a player, payments made by clubs to football agents were in fact made in the primary interest of the footballers not that of the paying club. Accordingly, the agreed remuneration should have constituted an additional employment income for the player (other than the remuneration received for the performance of sports activities), since, by paying the invoices “on behalf” of the player, the sports club guaranteed the player an economic benefit in addition to his normal remuneration. This has led the tax authorities to assess a benefit in kind equal to the amount paid by the football club to the agent, on the basis of the “principle of attraction” provided for in Article 51(1) of the Italian Income Tax Act, according to which income from employment includes any remuneration, in cash or in kind, payable directly or indirectly by the employer in respect of an employment relationship.

In short, the Italian tax authorities claimed a number of breaches, such as the failure of the employer/club to withhold taxes on the players’ employment income, the improper deduction for IRES (Income tax) and IRAP (Regional tax on productive activities) purposes of costs arising from the payment of agents’ fees by the clubs (although the same payment would have been deductible from the IRES tax base as an employment expense if it had qualified as a fringe benefit), the improper deduction of VAT on agents’ invoices and the issuing of invoices by agents for non-existent transactions.

Therefore, in order to curb the growing number of disputes arising from tax audits, from 1 January 2013 the legislator introduced a legal provision in Article 51(4-bis) of the Italian Income Tax Act according to which the 15% of the remuneration paid by a football club to an agent was regarded as fringe benefits for the player and taxed as employment income. However, with the resolution of 21 March 2014, FIFA abolished the licensing system for players’ agents and deregulated the matter by introducing the concept of intermediaries (see the document “FIFA Regulations on Working with Intermediaries“, in force since 1 April 2015). This process resulted in abolishing the prohibition of multiple representations and led the Italian legislator to repeal the legal provision, effective as of 1 January 2016. As a result, the Italian tax authorities have resumed their investigation into the undeclared income of football players in relation to the payment of agents’ fees to sports clubs. In addition, the 2018 Italian Budget Law re-introduced the previous licensing system in Italy and established the “National Register of Sports Agents” within the Italian National Olympic Committee – CONI (accordingly, the FIGC has adopted its own regulations). Thus, FIFA has resumed its efforts to regulate the activities of football agents with the entry into force of the “Football Agents Regulations”.

Given the foregoing, it is worth asking how the FFAR may potentially affect the assessment of fringe benefits in Italy. Looking at article 14(2) of the FFAR, one can read that “Payment of the service fee due under a Representation Agreement shall be made exclusively by the Client of the Football Agent. A Client may not contract with or authorise any third party to make such payment’. This means that only the (natural or legal) person who has signed the representation agreement with the football agent can pay the fee. Thus, in the case of an individual representation, the payment can only be made by the player/coach, the Engaging entity or the Releasing entity. Instead, in the case of a dual representation, the player/coach must pay at least 50% of the commission due to the agent, while the Engaging entity may contribute up to 50% of the fee (in consideration of the services actually rendered for its benefit), in accordance with the provision contained in article 14(10) of the FFAR (“Where a football agent acts on behalf of a client and an individual in the same transaction pursuant to article 12, paragraph 8 a) of these regulations (permitted dual representation), the Engaging Entity may pay up to 50% of the total service fee due“). The only exception is when the gross annual remuneration agreed between the parties is less than USD 200,000. In this case, article 14(3) of the FFAR provides that the Engaging Entity may agree with the player/coach to pay the commission due to the agent. Obviously, from an Italian tax perspective, the payment represents a benefit in kind for the player, subject to ordinary taxation as employment income.

In the author’s opinion, it is undeniable that the number of investigations by the tax authorities regarding the assessment of additional remuneration for the employee can be significantly reduced by article 14 of the FFAR, which requires the player/coach to pay at least 50% of the fees due to the agent. On the other hand, the final goal of FIFA reform may have its limits. If it is true that the fees paid to agents could be reduced overall, as they would no longer be determined on the basis of free negotiation between the parties, but calculated on the basis of objective criteria (such as the player’s annual salary or the transfer compensation), there could also be a significant increase in labour costs for the Engaging entity, as the players/coaches could negotiating a “net” salary which already includes the fee to be “passed on” to the football agent. Effectively transferring the main obligation to the new club in the form of higher remuneration (taxed as employment income).

With regard to the fees to be paid in the case of dual representation, it cannot be excluded that new assessments will have to be made in order to verify the allocation between the player/coach and the Engaging Entity, with the latter being able to assume, within the 50% limit (pursuant to article 14(10) of the FFAR), a part corresponding to the services provided by the agent for the benefit of the other party (obviously, much will depend on how the parties have formalized the representation mandate; in this sense, article 12(7) of the FFAR establishes that: “A Representation Agreement is valid only if it contains the following minimum requirements: d) The nature of the Football Agent Services to be provided”.

Finally, it should be noted that article 15(3) of the FFAR introduces an anti-avoidance rule aimed at countering the maximum limits on commissions to be paid to agents (as per Article 15(2) of the FFAR), by charging fees under the heading of Other Services (defined as “any services performed by a Football Agent for or on behalf of a Client other than Football Agent Services, including but not limited to, providing legal advice, financial planning, scouting, consultancy, management of image rights and negotiating commercial contracts”). More specifically, if fees for Other Services are charged in the 24 months before or after the conclusion of a transaction (e.g. the employment, registration or deregistration of a player with a club, the employment of a coach with a club, the transfer of a player’s registration from one club to another or the establishment, termination or amendment of a player’s terms of employment), it shall be deemed that also the Other Services were part of the basic services provided by the agent in the transaction unless the contrary is proved (by the client or the agent himself).

However, it is likely that this will lead to two main consequences. The first will be the concentration of the main activities of agents on services ancillary to the typical professional football services, as these kinds of fees are not regulated by any cap. The second, given the scope of the anti-avoidance provision, will be the potential for disputes with clubs over the correct qualification of activities that may or may not be part of the Football Agent Services or Other Services.


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