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By: Martin Litwak (@MartinLitwak)
As millions of fans around the world followed everything related to the sporting aspects of the game in real time. Lionel messi, and calculated in advance the titles at continental and global level that now the PSG I could finally win, my head couldn’t get away from the tax consequences and estate planning related to Lio’s change of tax residence. Occupational risks or professional deformation …
This is because, as everyone knows, both the signing of a contract and the change of a person’s residence are acts that generate economic consequences which, given the figures that have been dealt with in this case, are more that relevant.
In this context, the objective of this column is to review some of these consequences.
First of all, and in summary, it is important to stress that – for the reasons that we will see below – Messi will be fiscally better in Paris than in Barcelona.
This is so for the following reasons:
- Although social charges and in general labor taxes are higher in France (where they exceed 50%) than in Spain (where they can reach 48%), these types of contracts are concluded “net” of taxes. (mainly because clubs tend to have more tax planning options and because players are generally unaware of the tax regimes of the countries in which they play).
- In terms of income tax for “non-professional” income (ie income linked to the use of the personal brand, results of financial investments, dividends, etc.), here again France is a little less expensive than the Spain.
- The big difference however goes through the wealth tax. While France eliminated it in 2017, arguing that it had cost the country, in loss of investment, the double of what they had managed to collect, the autonomous community of Catalonia has one of the highest in the world. In fact, the cuota that los Catalanes deben pagar anualmente por este gravamen is calculated aplicando to the imponible basis una alícuota progresiva that empieza in 0.21% pero that ends in 2.75% by the porción del patrimonio que supere los 10.7 millions of euros. In Messi’s case, we’re talking about annual payments of around more than $ 10million a year for that tax alone (unless Forbes and Celebrity Net Worth get it wrong and Flea’s fortune doesn’t reach $ 600million. of dollars).
What then should he take care of Messi about estate planning at this stage in your career (if you haven’t already)?
From the following:
- In the first place, to give the tax reduction in Spain in the right way. It’s not something that happens to her about Shakira, who for her lives in the Bahamas, but for the Treasury, she also lives in Spain! Obviously, the case of Lionel is different since, in the case of Spain and France, taxes can be compensated for both being members of the European community, but this compensation does not take place when in one of the States there is a tax (that is to say the fortune tax) that, in the other, not. For the rest, given that there is also an “exit tax” in Spain, which Messi would have to pay because he has resided in this country for at least 10 of the last 15 fiscal years, low taxation is an issue that needs to be addressed. carefully studied.
- If you have prepared legal documents for the administration and / or transmission of your property in the event of disability or death, adapt them, as these types of documents are usually governed by the laws of the deceased’s last domicile, this who be France.
- Related to the above, if you don’t have any, urgently prepare them, because after Japan (55%) and South Korea (50%), France is the country with inheritance tax. the highest that exist (45%). For example, this tax in Catalonia is between 7% and 32%.
- Finally, it is undoubtedly time to analyze the tax residency to adopt after retirement.
On the other hand, and to close this analysis, one wonders what would have happened if Lio, instead of signing for French PSG, had done it for him. Manchester City, Inter Milan or his beloved Newell’s Old Boys.
Basically, this would have been the result:
- – In the case of having moved to Italy or the United Kingdom, Messi would have been much better than in France from a tax point of view; mainly because the two countries have very advantageous tax regimes for new tax residents which include the payment of a fixed sum and very small for the profits obtained outside their territory.
- – If I had signed for an Argentinian club, I would have been in the worst of all worlds. Not only would you pay income tax on worldwide income (i.e. earnings earned in Argentina and abroad for any reason), but you would also be subject to the one of the highest wealth taxes in the world and possibly the solidarity contribution (if it is extended). In short, if he came to play at Newell’s, given the salaries that are paid and the taxes in force, Messi would pay to play.
Martin Litwak is founder and CEO of the company @UntitledLegal, a legal services boutique specializing in investment funds, international estate planning and wealth technology and – at the same time – the first “Legal Family Office” in the Americas. On the other hand, Martín, in addition to having written numerous chronicles and given lectures on subjects of his specialty around the world, is the author of the books “How the richest protect their property (and why we should imitate them) “and” Tax havens and tributary hells “.
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