Perfect Play or Epic Failure for Football Players in Regard to VAT?

Recent news showed that ANAF extended its interest for taxation not only to natural persons performing commercial activities online, but also to professional football players. For the latter, the interest is particularly in the field of VAT and it seems that some recent tax decisions qualify professional football players as taxable persons performing an economic activity who should have collected VAT.

Today’s question on everyone’s lips is whether athletes who perform activities under a sports activity contract provided by the Romanian Ministry of Youth and Sports have the obligation to register for VAT purposes when exceeding the legal cap of 300,000 ron income.

Therefore, the legal issue at hand is of interest to all athletes who in a fiscal year have exceeded the legal cap of 300,000 lei representing income generated from sports activities and who are not employed with an employment contract, but with a sports activity contract.

If the answer to the question were to be affirmative, all athletes who, exceeding the ceiling, issued non-VAT invoices to the sports clubs they contracted with, and as a result, did not collect the related VAT, would now according to ANAF have the obligation to pay according to the tax authorities of the uncollected VAT calculated retroactively from the last 5 years, plus late payment penalties and non-declaration penalties also calculated retroactively, until the actual payment date. Such an approach would lead to the situation where not few athletes would owe the state budget enormous sums of money representing VAT and late payment penalties (plus fines for not submitting the mandatory forms).

In Europe, the problem of VAT owed by athletes does not really arise, as they are employed by sports clubs in most European countries with standard employment contracts. In Romania, however, the legal framework offers more possibilities to conduct activity by athletes, through an employment contract or without being an employee, but a “collaborator” through a sports activity contracts.

The reason why the vast majority of athletes conclude sports activity contracts is both the imposed policy of sports clubs, which opt for this type of contract to which the provisions of labor law are not applicable, but also the more favorable perspective of the applicable fiscal regime.

To understand the legal framework in force and applicable to this case, we point out that Law no. 69/2000 on physical education and sport clearly defines a number of aspects; thus, the professional athlete is defined as the person who fulfills two conditions for the practice of the sport in question: owns a professional athlete’s license and concludes an individual employment contract or a sports activity contract with a sports organization.

The activity carried out by them is expressly framed by art. 141 in the category of independent activities, although the conditions provided by the Fiscal Code regarding this type of activities are not met.

Art. 7 point 3 Fiscal Code lists 7 individualization criteria, and for an activity to be classified as independent, it is necessary that at least 4 of these criteria be met:

– the natural person has the freedom to choose the place and way of carrying out the activity, as well as the work schedule;

– the person has the freedom to carry out the activity for several clients;

– the risks inherent in the activity are assumed by the person carrying out the activity;

– the activity is carried out by using the patrimony of the person who carries it out;

– the activity is carried out by the person by using his intellectual capacity and/or physical performance, depending on the specifics of the activity;

– the person is part of a professional body/order with the role of representation, regulation and supervision of the profession carried out, according to the special normative acts that regulate the organization and exercise of the respective profession;

– the person has the freedom to carry out the activity directly, with hired personnel or through collaboration with third parties under the law.

It is obvious to us that sportsmen in general do not meet these criteria whenever they are linked to and perform their tasks in the service of a club. It is true that in some sports (e.g. tennis, golf, athletics) sportsmen do meet 4 out of 7 criteria and perform an independent activity, but football players, volleyball players or hockey players always depend on their clubs, just as any employee.

However, Law no. 69/2000 expressly states that, by way of derogation, the activity carried out on the basis of the sports activity contract is an independent activity, regardless of the way it is organized and carried out, without checking the fulfillment of the criteria set out at art. 7 points 3.1 – 3.7 of the Fiscal Code and that the income generated on the basis of the sports activity contract represent income from independent activities.

Moreover, the Legislator expressly provided that these activities cannot be reconsidered as dependent activities.

The essence of independent activities is the own management of accounting and the payment of taxes directly. The rule is however inapplicable as far as athletes are concerned, as shown in the Fiscal Guide for natural person taxpayers who earn income based on sports activity contracts (page .4): the calculated tax (of 10%) is withheld at source by the income payers, i.e. by sports clubs.

From a VAT perspective, the stake of the discussion is the manner in which each individual athlete acts – dependent or independent, which must be analyzed on a case-by-case basis, as shown by the Guide made available by the tax authorities in 2021; also, the occurrence of the obligation to collect VAT is correlative to the classification of the person in the taxable category as defined by law.

The taxable person is defined by the Fiscal Code in general terms, including all economic activities that are carried out in an independent manner and regardless of the place, the result or the purpose of this activity. Therefore, a taxable person necessarily carries out an independent economic activity.

Exempted from taxation according to art. 269 ​​para. (4) are employees and persons who are linked to the employer by a legal instrument, which creates an employer/employee relationship in terms of working conditions, remuneration or obligations of the employer.

Moreover, the Guide states that in the situation where the athlete’s activity qualifies as self-employed, he does not carry out taxable operations for the purposes of VAT.

So, we note that the situation must be viewed from several angles, depending on the subject under analysis. Thus, although the activity of athletes carried out under sports activity contracts is framed by law in a derogatory way as independent activity, this fact has fiscal effects only from the perspective of the rules on income tax and mandatory contributions.

At the same time, although the law frames the activity of athletes in this way, from the VAT perspective, this aspect is irrelevant, since in this case the situation is analyzed on a case-by-case basis, following the actual way of carrying out the activity.

Although, by the will of the legislator, an independent character was conferred on the activities performed by the performance athlete (with a different tax regime, pecuniary advantage for the sports structure, but which lacks the athlete from the legal payment regime specific to labor law), analyzing the contractual obligations of performance athletes, it is found that, in fact, a dependent activity is carried out, which is more specific to labour law.

We must recall that an analysis on this topic has been performed by the Court of Justice of the European – specifically by Advocate General Tesauro in his Opinion delivered on 4 June 1991 in case C-202/90, Ayuntamiento de Sevilla c. Recaudadores de Tributos de las Zonas primera y segunda. There are essential conclusions to be drawn from this Opinion:

– One needs to determine whether the existing legal tie creates a relationship of employer and employee as regards working conditions, remuneration and the employer’s liability (even if there is no individual work contract in the narrow sense of the term).

– First, in terms of working conditions, an independent activity implies that the sportsmen is free to choose his/her colleagues, the material base necessary for the performance of services and the working hours. It is also common ground that such an independent sportsmen does not recognize to a club a right to control his/her activity and to impose disciplinary measures (such as those which are usually included in a sports’ club internal regulations).

– Second, in terms of remuneration, an independent activity implies that the risks are with the sportsmen (e.g. a tennis player depends on the money collected from prize and sponsors), while in a dependent activity such risks rest with the club, which has to provide for the sportsman.

– Last but not least, generally speaking the liability for all issues that are not connected with the sportsmen’ conduct (e.g. responsability for disrespect of the games’ rules) rests with the club, an issue which is also specific to dependent activities. Sports clubs are liable to the sports bodies, public authorities, media trusts and to the general public, while sportsmen only perform for such club.

There is no restriction, under Romanian law, to use the criteria provided by article 7 of the Fiscal Code to determine the dependent nature of the activity from the point of view of VAT as well.

We therefore conclude that in order to establish whether the activity is effectively carried out independently, at least 4 of the aforementioned legal conditions, for example, must be met. This matter, however, will not have effects on the classification of the activity as independent or dependent activities, as they are already legally classified as independent, but will have effects on the obligation or not of the related VAT collection.

Although ANAF focused its attention primarily on footballers, it is predictable that it will direct its attention in the coming months on other categories of professional athletes as well.

In conclusion, what is the tax status of athletes from a VAT perspective?

Preliminarily, as it was pointed out by the doctrine, a comparative study of the national legal systems in Belgium, France and Spain shows that these countries have a complex and very well-defined legal framework specific to sport and which assigns a special legal status to professional sportsmen and women. Thus, all three legal systems contain special rules on the nature of the contract of professional sportsmen and women and its specific features.

All three countries contain clear provisions establishing that professional sportsmen and sportswomen enter into an individual employment contract with their clubs which contains specific clauses and which also benefits from a derogatory tax regime.

All of the above leads us to conclude that the employer is in fact paying net stipulated remuneration to the athlete, even though the athlete is not a third party provider (self-employed activity). Basically, we conclude that we are faced with a simulated employment relationship in various civil agreements.

In reality, as mentioned above, we consider that the footballer’s activity is far from being independent, given that the relationship between sportsmen and clubs is a classic employment relationship, especially in the context of team sports.

On the other hand, things are much more obvious in the case of individual sports (e.g. tennis, golf, sometimes athletics) where it is quite clear that we are talking about an independent activity.

In our opinion, sportsmen are in a simulated employment relationship in various types of civil agreements, as the relationship between sports clubs and players is based on dependency: sportsmen and women cannot have several employers at the same time, they do not allow another paid activity, the professional footballer’s licence does not have the meaning of a licence to practise in a regulated profession (e.g. as we refer to when discussing architecture, law, etc.).

In the same sense, the sportsperson is not tied to a specific professional status (regulated professions), but his or her licence basically states the sportsperson’s membership of a sports club.

All these aspects lead us to conclude that the athlete has a legal status which is similar to that of an employee of the sports clubs, although employers opt for the name of civil agreements. Therefore, including for these reasons, sportsmen and women are not obliged to register for VAT purposes.

The new campaign by the tax authorities is due to the tendency to require sportsmen and women to pay VAT in the same way as self-employed persons.

The fiscal prerogative held by the tax authorities under Article 11 of the Tax Code cannot tend to change the legal nature of the relationship between sportsmen and sports clubs.  We consider that, although they are not bound to the employer by an individual employment contract but by other legal instruments, they do not act independently when the person does not have the appropriate organisational freedom in terms of the material and human resources used for the exercise of the function (professional football player), such as the freedom to choose several collaborators, the working hours, the material basis necessary to carry out the activity and, last but not least, the economic risk inherent in this activity is not borne by that person.

However, as a principle, the general anti-abuse clause in article 11 of the Fiscal Code cannot be applied in the field of indirect taxes.

Therefore, we also consider that, in so far as the activity of the athlete, coach or referee qualifies for VAT purposes as a dependent activity, the athlete does not carry out taxable transactions for VAT purposes and is not obliged to collect the tax, regardless of the amount of income from this activity.

This article was prepared, for the Blog of Costaș, Negru & Asociații, by a team comprising Dr. Cosmin Flavius Costaș, Ms. Larisa Mărginean and Ms. Clara Dohotar. Costaș, Negru & Asociații provides legal services in a variety of practice areas, including Sports Law and Tax Law.

Costaș, Negru & Asociații is a lawyers’ civil partnership with offices in Cluj-Napoca, Bucharest and Arad, providing legal assistance, representation and consultancy in a number of practice areas with a team composed of 17 lawyers and consultants. Details regarding legal services and the members of the team can be found on the website All rights for the materials published on the company’s website and on social media belong to Costaș, Negru & Asociații, their reproduction being allowed only for information purposes and with the correct and complete disclosure of the source.

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