Radamel Falcao García’s novel during his time in Millonarios seems not to have ended. After last Tuesday the Bogotá club announced that, despite several attempts and the interest of both parties to renew the player’s contract, the team’s directors and sponsors did not “they managed to counteract the tax effects of wealth and income”which would prevent Falcao from playing in the country for at least one more season.
(Read: Radamel Falcao García would not leave Millonarios: this is what is known).
However, this Thursday the case seems to have taken a 180 degree turn, when it became known that the board of directors of the ‘ambassador’ club would be seeking to arrange a new contract for the return of the scorer.
According to the director of the station ‘W Radio’, Julio Sánchez Cristo, The club’s directors would have obtained the resources to assume the tax effects so that Falcao can continue playing for Millonarios.
However, it is not yet known if the player will accept this new offer.
Income and obligations of soccer players in Colombia
To understand how the contracting market works in Colombian professional football, you must know that Soccer players are hired through an employment agreement that includes all the conditions related to their performance.
This type of contract, regulated by the FIFA Regulations on the Status and Transfer of Players, may include special clauses such as mandatory renewals and performance awards, based on goals, assists or participation in matches.
(See: The figures that distanced the possibility of Falcao’s return to Millonarios).
According to Santiago Arbouin, Partner at CMS Rodríguez-Azuero, specialist in Tax, Customs & Foreign Trade Law, These incomes are considered salary and are subject to Income Tax, with rates ranging between 19% and 39% according to current regulations..
“Among the special clauses that a footballer’s contract may include are mandatory renewal upon completion of the initial document and awards based on the player’s performance. For example, a striker may receive financial incentives for surpassing a specific number of goals during the season or for playing a certain number of minutes in matches. This also applies to the number of assists or the number of games played, since these aspects are considered work performance.”says Arbouin.
In the Colombian context, changing teams within the country does not have significant tax implications, as it is considered a move within a standard employment contract.
However, it is essential to consider the signing bonus, which can be treated as earned income subject to taxation if paid after signing the contract. On the other hand, when moving abroad to play, it is essential to check if the new jurisdiction applies an “Exit Tax”, a tax that does not exist in Colombia but must be carefully evaluated on a case-by-case basis.
Millionaire fans.
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“The determination of the taxation of soccer players in Colombia is based on their tax residence. If a soccer player becomes a tax resident, they must declare and pay taxes on all their income worldwide, complying with the requirement of permanence of more than 183 days in the country. For example, players like Falcao, who are not tax residents in Colombia, can choose not to acquire this residence and pay taxes only on their national source income, with a rate of 20%. In addition, there are other criteria for. preserve residence prosecutor that must be evaluated on a case-by-case basis”explained María Camila Domínguez, Associate of CMS Rodríguez-Azuero.
Colombia has implemented measures to ensure tax compliance and combat tax evasion, including law 2277 of 2022 that imposes severe penalties, including prison, for those who underdeclare assets.. As a member of the OECD Global Forum on Transparency and Information Exchange, the country actively participates in the exchange of financial and tax information between jurisdictions, thereby improving its ability to detect undeclared income and assets abroad.
(Also: New partners: Rigoberto Urán and Carlos Vives bet on Fortaleza).
For athletes in Colombia, it is crucial that they evaluate certain criteria to optimize their tax situation, such as reviewing tax residency considering criteria such as permanence, family ties, income and assets. Strategic tax planning should maximize special deductions and take advantage of the 25% exempt income, with caution regarding income limitations.
Likewise, asset protection through trusts or companies is essential to ensure efficient transfer of assets, while understanding international tax laws and double taxation treaties can help mitigate double taxation. Finally, rigorous compliance with all tax obligations, both in Colombia and abroad, is essential to maintain transparency and avoid legal problems.
The accounts that make the agreement difficult
As it became known, Falcao’s net worth tax payment amounts to $3,548 million. However, other taxes, such as withholding at source, increase the tax burden, without taking into account the salary that must be paid to the footballer.
In total, it was estimated that, on a basic basis, Falcao needs to earn around $5.8 billion to pay those taxes.
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