Premier League clubs shopping for new players in Spain will enjoy increased purchasing power in future transfer windows thanks to a ruling passed by Spanish tax authorities this week.
La Liga stars who have been linked with a move to England such as Athletic Bilbao’s Oscar De Marcos or Atletico Madrid’s Antoine Griezmann may now be considered more realistic targets after Spain’s tax administration altered a law connected to player buyout clauses that has long acted as a barrier in negotiations with English teams.
As Manchester United discovered to their chagrin during a pursuit for midfielder Ander Herrera from Athletic Bilbao three summers ago, prising a player away from a Spanish club that does not want to sell is not as simple as agreeing to pay the buyout clause written into their contract.
It is mandatory for clubs in Spain to include a cláusula de rescisión, or buyout clause, in the contract of every single player, enabling them — in theory — to pay off their contract should they want to leave.
In practice the clause is likely to be outside the affordability range of a player so potential suitors arrange to give the money to the player who will then pay their current club via the Spanish football association.
The issue, however, is that until recently the money given by a club to a player has been recognised by Spanish authorities as personal income and thus comes with a tax charge — potentially boosting the fee by 20 to 50 per cent.
In 2013, then United manager David Moyes was unable to complete the signing of Herrera (he joined a year later under Louis van Gaal) as Bilbao played hardball and the club opted not to pay the tax costs on top of the €36m buyout fee.
“It’s been a very useful defensive tactic for Spanish clubs to stop other clubs poaching their players,” Tiran Gunawardena, a sports lawyer at Mills & Reeve, told City A.M.
Bilbao, who are particularly reticent to let star players go due to their Basque-only player policy, caused Bayern Munich a similar headache in 2012 when they signed Javi Martinez. The experience wrangling Spain’s tax laws prompted them to pay over-the-odds for Barcelona’s Thiago Alcantara just a year later.
“At Barcelona Thiago’'s buyout clause was €18m but in the end Bayern Munich ended up paying €20m for the player,” Jorge Pecourt, head of sports at Spanish law firm Cuatrecasas, Gonçalves Pereira told City A.M.
“They agreed to pay €2m on top of the clause to Barcelona in order to avoid paying the buyout clause and the taxes on top of it.”
Yet a binding resolution passed in Spain this week has changed the definition of a payment made from purchasing club to player meaning forking out for hefty tax add ons is no longer required.
“The tax administration has ruled that the payment from the club on behalf of the player is now no longer considered income but a capital gain for the player,” Pecourt explains.
“That difference is very important because now when a player fills in his personal income tax, he can point to this capital gain as a loss because he paid the money to his former club. You can not offset as a salary as a loss, but you can if it’s defined as a capital gain.”
Clubs outside of Spain could now be more open to signing a player from the country, while La Liga presidents will no longer be able to use the spectre of a large tax bill as a crutch in negotiations.
“Any big club that’s tried to buy a player from Spain will have likely encountered this issue at some point,” says Gunawardena.
“Suffice to say, 20 to 50 per cent on top of what is already a significant amount is enough to deter clubs from activating these clauses.
“But now, the dynamics have changed for both buyer and seller. Once an English or German club activates a buyout clause and doesn’t have to pay tax on it, I’m sure other clubs will follow suit over the next transfer windows.”