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Taxation of image rights and companies abroad

On Thursday, April 8th 2021, the Regional Courtroom of Madrid has once again, absolved footballer Xabi Alonso and his advisors. They were accused of tax offence. This acquittal is very significant as he is the only footballer who did not want to make a deal with the Tax Agency. He defended his innocence in a round of similar cases investigated by the Treasury to artists and athletes. So far, the Courts have decided in his favour on two occasions. There will surely be more appeals. The main issue here is the taxation of image rights.

The taxation of image rights

Those rights held by companies in charge of managing them. According to article 92 of the “IRPF” Income Tax Law, the individual taxpayer (Xabi Alonso in this case, any artist, sportsman or sportswoman who exploits his or her image), will deduct an amount for this concept in their income tax return, specifically "...the value of the consideration paid prior to the contracting of the employment services of the individual or to be paid by the person or entity referred to in paragraph c) of section 1 for the acts mentioned therein.

This amount shall be increased by the amount of the payment on account referred to in paragraph 8 and reduced by the value of the consideration obtained by the natural person as a result of the transfer, consent or authorisation referred to in paragraph a) of section 1, provided that this was obtained in a tax period in which the natural person who owns the image is a taxpayer for this tax".

Of course, this topic is not absolutely "crystal clear". The taxpayer will have to charge this income if three requirements are met.

The first of which is that "the right to exploit their image has been assigned or consented or authorised its use to another person or entity, whether resident or non-resident. For the purposes of the provisions of this paragraph, it shall be irrelevant whether the assignment, consent or authorisation took place when the natural person was not a taxpayer".

Minimise taxation

Therefore, in principle, the fact that the image rights company is a non-resident would not imply that no income would be charged in the income tax return for the image rights, if the rest of the requirements were met. In any case, and regardless of which side is ultimately right in this case, trying to minimise taxation with the existing legal mechanisms through companies abroad for the taxation of image rights is something that should be reviewed beforehand, but which is perfectly possible (this is also reinforced by the two judgments of this player, so far).

First of all, it is important to define how image rights are taxed under Spanish law. Once this is clear, then all possible tax scenarios can be considered and adapted to the particular case of each individual in order to optimise the taxation of this income.

Are you an artist or athlete? Just reach out for us! We at Carrillo Asesores will be delighted to help you.

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