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La Liga players may not be on the pitch yet, but at least one player is still making news: Atlético Madrid striker Diego Costa had pleaded guilty to tax fraud.

The tax charges stem from Costa’s transfer to Chelsea FC in July of 2014. Costa enjoyed success at Chelsea for a few years (winning two Premier League titles) before returning to Atletico Madrid in 2017.

After his return to Spain, Costa came under scrutiny for allegedly failing to declare and pay taxes on money from a lucrative soccer cleat deal with Adidas. The Spanish tax authorities allege that the Brazilian-born Costa signed the cleat contract while he lived in Spain, but before he signed to play for Chelsea. At the time, Costa argued that he was a British resident for tax purposes and had no obligation to pay tax in Spain.

Costa was eventually charged with failure to report and pay taxes not only on income related to his image rights, but also €5.15 million ($5.84 million U.S.) in revenue tied to the Chelsea move.

This week, Costa appeared in court (appropriately masked for COVID-19) and pleaded guilty to the charges. In return, he was sentenced to six months in prison, restitution, and a fine of €543,208 ($615,604 US). In Spain, those who receive a light prison sentence do not usually serve time unless the offense involves a violent crime or if the defendant is a habitual offender. Typically, a light sentence is one under two years.

The sentence is similar to those handed down to fellow La Liga player, Lionel Messi, and La Liga-turned-Serie A player Cristiano Ronaldo.

Why does it feel like Spain is singling out soccer stars? That may be a loaded question. But at least one part of the answer is tied to the so-called “Beckham Rule” – the law in Spain which allegedly benefited England’s David Beckham, who played for Real Madrid. Under prior Spanish law, you could elect to be taxed as a nonresident if you lived and worked in Spain if you met specific criteria. The law was short-lived and ended in 2010 (perhaps, not coincidentally, after Beckham left Spain).

Spanish authorities have since accused a number of soccer players of failing to report income linked to transfers and image rights. Other big names targeted for prosecution by Spanish tax authorities in recent years have included fellow soccer stars Samuel Eto’o and NeymarJavier Mascherano, F.C. Barcelona club president Josep Bartomeu, and former F.C. Barcelona club president Alexandre “Sandro” Rosell.

I finished a disappointing fourth place in this year’s Fantasy Football. Even worse: I was beaten by a 13 year-old. That might explain why I’m choosing to keep my money firmly in my wallet on Super Bowl LIV: No gambling for me. Luck is rarely on my side.

But millions of folks are willing to take their chances on Super Bowl Sunday. According to the American Gaming Association, roughly 26 million people – more than four times the population of Missouri – are expected to bet on the Super Bowl. That represents a 15% increase over last year and means that more than one in ten American adults will be betting on the game.

Those 26 million people are expected to wager approximately $6.8 billion on the NFL championship game between the Kansas City Chiefs and San Francisco 49ers. Bets are expected across the board: in gambling establishments, online, and living rooms between friends and family. And not everyone is doing it illegally: fourteen states now offer legal, regulated sports betting.

Most gamblers are choosing Kansas City to take home the Lombardi Trophy. Oddsmakers favor the Kansas City Chiefs by 1.5 points over the San Francisco 49ers. But wagers don’t start and stop with the winning team. Bets have also been placed on who will score first, the result of the first drive of the game, how many interceptions there will be, and how long it will take Demi Lovato to sing the word “brave” in the national anthem.

From friendly wagers to jackpots, gambling winnings are reportable for federal income tax purposes. When the numbers are big enough, those winnings are also reported to the Internal Revenue Service (IRS) using a federal form W-2G, Certain Gambling Winnings (downloads as a PDF). A form W-2G is issued when gambling winnings other than those from bingo, slot machines, keno, and poker tournaments, are $600 or more and at least 300 times the amount of the wager. A form W-2G will also be issued if winnings are subject to withholding, including backup withholding and regular gambling withholding. For 2020, gambling withholding is equal to the cost of backup withholding: a flat 24%.

If you gamble for fun, you include your winnings as income on line 8 on Schedule 1 of your form 1040.

Someone who occasionally wagers, according to IRS (memo downloads as a PDF), is a casual gambler or one “not engaged in the trade or business of gambling.” If you’re wondering about the line between fun and business, the IRS uses a facts and circumstances test, noting “[l]ike any other taxpayer, a gambler has the burden of proving that his activities rise to the level of a trade or business.”

And here’s why that matters. While all gamblers have to report their winnings, casual gamblers may only deduct losses up to the amount of winnings as an itemized deduction on Schedule A at line 16, Other Itemized Deductions.

The deduction for gambling losses remains in place under the Tax Cuts and Jobs Act (TCJA). Miscellaneous deductions that exceed 2% of your adjusted gross income (AGI) were eliminated, but miscellaneous expenses not subject to the 2% threshold, like gambling losses, remain deductible. The amount that you can deduct on this line cannot be more than what you reported as income on line 8 on Schedule 1.

Other TCJA-related changes may affect your ability to claim losses as a casual gambler. Notably, the increase in the standard deduction, combined with changes to home mortgage interest and state and local tax deductions, make it less likely that taxpayers will itemize. That means that most taxpayers will claim the standard deduction. If you opt to claim the standard deduction instead of itemizing your deductions, then any casual gambling loss is necessarily lost.

If you’re not sure how and where to report, consider trying out the IRS’ Interactive Tax Assistant. You’ll need: 

  • Your and your spouse’s filing status;
  • Amount of your gambling winnings and losses; and
  • Your form W-2G

When gambling is your trade or business, gambling-related income and expenses are reported on a Schedule C. You do not have to itemize to claim your losses. However, the TCJA modified the definition of “gambling losses” under section 165(d) of the Tax Code to include any deduction otherwise allowable in carrying on any wagering transaction. What that means is that taxpayers whose business is gambling can no longer deduct non-wagering expenses, such as travel to and from a casino, separately from losses. So, for example, a taxpayer with $10,000 in winnings may deduct up to that amount in combined losses and related expenses. This change applies to professional gamblers for the years 2018 through 2025. That’s a shift: Before the TCJA, professional gamblers could deduct travel and other costs related to gambling without regard to wins and losses (that was the rule previously confirmed by the Tax Court in Mayo v. Commissioner).

But most of us aren’t considered professional gamblers (and in my case, that’s best for everyone). Professional or not, if you plan to gamble—whether on Super Bowl Sunday or in a game of Texas Hold’em next weekend—keep excellent records. Your records should include the date and location where you were gambling, as well as the amounts and type of wager. That’s easy when you’re at the Sugarhouse Casino but a little more difficult when you’re with friends or office workers at your local bar. Consider writing those down in a notebook or capturing them on your cellphone so that you can present your tax pro with proof come tax time. Remember: Whether you’re cheering on the Chiefs in Vegas or fanning over the 49ers in your living room, the gambling and tax rules are the same.

Gregory R. Hampton, a New York Giants fan, might have been the biggest winner in the National Football League (NFL) draft. Hampton won 100 years of season tickets as part of the league’s ‘Tickets for 100 Years’ centennial contest. It was probably the most valuable get of the night (yes, even over the Cardinals taking Kyler Murray), but at what cost?

You may already know that winning a prize is similar to winning the lottery – and that means it’s subject to income tax. You can find the specific language in section 74 of the Tax Code:

Except as otherwise provided in this section or in section 117 (relating to qualified scholarships), gross income includes amounts received as prizes and awards.

The tax clause gained notoriety in 2004 when then-talk show host Oprah Winfrey told 276 members of her studio audience that they had each won a new Pontiac G-6 sedan. It sounded great until the audience realized that they were responsible for paying federal and state income tax on the cars; the retail price of each car was approximately $28,500 (audience members were issued forms 1099-MISC for reporting purposes). The resulting tax bills made the news, and not the good kind of news. It was no surprise, then, that in 2010, when Oprah gave her audience a trip to Australia, she really meant all-expense-paid, including taxes.

So, when NFL Commissioner Roger Goodell announced that Hampton was the NFL’s Contest Grand Prize Winner, I wasn’t surprised to see a question pop up on Twitter about the tax consequences (okay, granted, Adam is an EA and tax geek like me, but still). In response, I headed over the NFL contest website to figure out the details. Here’s what I found.

First, the grand prize winner will take home:

  • Two (2) season tickets for the NFL team of his/her choice for the 2019 through 2118 NFL seasons (subject to the terms herein) (the “Season Tickets”)
  • One (1) season pass of NFL Red Zone for the 2019 through 2118 NFL seasons (subject to inflation)
  • One (1) season pass of NFL Game Pass for the 2019 through 2118 NFL seasons (subject to inflation)

The approximate retail value of the prize package is $425,673.00 – but it includes one more item:

  • Estimated taxes paid on Grand Prize Winner’s behalf (to help offset income tax liability imposed in connection with the Season Tickets) (to be based on prevailing supplemental federal tax rate each season and approximation of applicable state taxes based on prevailing rates)

In other words, the NFL is grossing up the prize to account for the taxes. Grossing up is a term that you may also see in employment contracts and it means that the person or entity writing the check or issuing the prize is tacking on some extra dollars to help cover the tax liability. And as confusing as it sounds, the amount that’s grossed-up is taxable, too (so yes, you have to gross up a little more).

To claim his prize, Hampton must agree to fill out a form W-9. The contest’s terms and conditions make it clear that a form 1099 will be issued. Additionally, other than what’s clearly stated as a part of the prize, “[a]ll federal, state and local taxes…are the sole responsibility of winner.”

Hampton was nominated as the world’s greatest football fan by his two sons, Jaydon and Jordon. He’s a lifelong Giants fan which means he deserved to win something this year (don’t @ me – even this Eagles fan will admit that his story is lovely and it’s pretty cute that his dog is named Saquon).

You can see the winning Instagram post here and see more about his story of super fandom on YouTube here.

Who’s going to win Super Bowl LIII? So far, odds-makers have the New England Patriots edging out the Los Angeles Rams for the win in Atlanta. But not everyone is counting out the Rams: Gamblers are putting down big bucks, upwards of $1 million, in favor of the NFC Champions. MGM Resorts has reported a $2 million money-line bet on the Rams, while Bookmaker William Hill took a similar $1.5 million bet. Overall, nearly 10% of Americans will wager a combined $6 billion on this year’s Super Bowl game—and it’s all taxable.

From friendly wagers to jackpots, gambling winnings are reportable for federal income tax purposes. When the numbers are big enough, those winnings are also reported to the Internal Revenue Service (IRS) using a federal form W-2G, Certain Gambling Winnings (downloads as a pdf). A form W-2G is issued when gambling winnings other than those from bingo, slot machines, keno, and poker tournaments, are $600 or more and at least 300 times the amount of the wager. A form W-2G will also be issued if winnings are subject to withholding, including backup withholding and regular gambling withholding. For 2019, gambling withholding is equal to the cost of backup withholding: a flat 24% (note that this rate is less than the prior 25% rate).

If you gamble for fun, you include your winnings as income on line 21 on the new Schedule 1 as part of the not-so-postcard-sized form 1040 (more on the new form here). Someone who wagers occasionally, according to IRS (memo downloads as a pdf), is a casual gambler or one “not engaged in the trade or business of gambling.” If you’re wondering about the line between fun and business, the IRS uses a facts and circumstances test, noting “[l]ike any other taxpayer, a gambler has the burden of proving that his activities rise to the level of a trade or business.”

And here’s why that matters. While all gamblers have to report their winnings, casual gamblers may only deduct losses up to the amount of winnings as an itemized deduction on Schedule A. That didn’t change under the Tax Cuts and Jobs Act (TCJA). The deduction for gambling losses remains in place; miscellaneous deductions which exceed 2% of your adjusted gross income (AGI) were eliminated, but deductions for miscellaneous expenses not subject to the 2% threshold, like gambling losses, remain.

However, other TCJA-related changes may affect your ability, as a casual gambler, to claim losses. Most notably, the increase in the standard deduction, combined with restrictions on home mortgage interest (more on that here) and state and local tax deductions (more on those here), make it less likely that taxpayers will itemize. That means that most taxpayers will claim the standard deduction. If you opt to claim the standard deduction instead of itemizing your deductions, then any casual gambling loss is, well, lost.

When gambling is your trade or business, gambling-related income and expenses are reported on a Schedule C, which means that you do not have to itemize to claim your losses. However, the TCJA modified the definition of “gambling losses” under section 165(d) of the Tax Code to include any deduction otherwise allowable in carrying on any wagering transaction. What that means is that taxpayers whose business is gambling can no longer deduct non-wagering expenses, such as travel to and from a casino, separately from losses. So, for example, a taxpayer with $10,000 in winnings may deduct up to that amount in combined losses and related expenses. This change applies to professional gamblers for the years 2018 through 2025. That’s a shift from years past: Before the TCJA, professional gamblers could deduct travel and other costs related to gambling without regard to wins and losses (that was the rule previously confirmed by the Tax Court in Mayo v. Commissioner).

If you do plan to gamble—whether on Super Bowl Sunday or darts at the pub next weekend—keep excellent records. Your records should include the date and location where you were gambling, as well as the amounts and type of wager. That’s easy when you’re at MGM Resorts but a little more difficult when you’re betting with friends or office workers at your local bar. Consider writing those down in a notebook or capturing them on your cellphone so that you can present your tax pro with proof come tax time. Remember: Whether you’re rolling dice in Vegas or betting in your living room, the gambling and tax rules are the same.

He originally vowed to fight tax charges against him, but Cristiano Ronaldo is now expected to plead guilty to tax fraud.

In 2017, the soccer superstar was accused of failing to pay 14.7 million euros ($16.5 million US) in taxes. He was alleged to have avoided paying taxes by funneling income related to image rights, meaning his likeness, the very thing that Ronaldo capitalizes on, through a series of offshore companies. If that arrangement sounds vaguely familiar, it is: the use of separate entities to hide income tied to image rights is the basis of accusations against fellow soccer stars like Samuel Eto’o and Neymar.

Initially, Ronaldo appeared immune to the tax allegations which plagued other soccer players, including Lionel Messi, who was found guilty of tax evasion in 2016 (despite an appeal, Messi’s sentence was upheld in 2017). However, in December of 2016, suspicions against Ronaldo were raised after the so-called “Football Leaks” – think Panama Papers with a hyper-focus on soccer players – suggested that Ronaldo had underreported his income.

Ronaldo denied the charges, and Real Madrid, then his club at the time, issued a statement defending the famous forward. However, when Ronaldo jumped to the Italian-based club Juventus in 2018, signing a four-year contract worth over 100 million euro ($113.7 million US), his lingering tax troubles were thought to have played a part. The previous year, he had told judge Monica Gomez Ferrer he felt victimized by the Spanish authorities and wanted to leave Madrid.

Despite arguing that he did nothing wrong, Ronaldo allegedly reached a deal with Spanish tax authorities in 2018. As part of the deal, Ronaldo agreed to plead guilty to four counts of tax fraud in exchange for a fine and a sentence of six months in jail for each offense, for a total of two years in prison. He will serve his sentence as probation, consistent with the treatment of other nonviolent first offenses.

Ronaldo will appear in a Madrid court tomorrow to formally confirm the terms of the deal and receive his sentence. The footballer is not expected to make a statement.

Ronaldo is #3 on Forbes’ list of the World’s Highest Paid Athletes (Boxer Floyd Mayweather is #1 and fellow soccer superstar Lionel Messi is #2). Ronaldo’s earnings are estimated to be $108 million, landing him at #10 on the Forbes’ list of the World’s Highest Paid Celebrities. He is considered one of the most popular athletes in the world.

The Cincinnati Reds may not have had a winning record in Major League Baseball this year, but they were big winners in court. The Ohio Supreme Court ruled 5-2 that the Cincinnati Reds aren’t required to pay taxes on promotional items that they give to fans who attend their games.
You may recall that the Reds challenged the Tax Commissioner of Ohio earlier this year on the question of whether promotional items that come with tickets are subject to use tax.

Like many sports teams (including my Phillies), the Reds use promotional items like bobbleheads, wall posters, and baseball cards, to woo fans to their games. The Reds don’t charge their fans separately for these promotional items: they come along with the ticket purchase. The Commissioner slapped the Reds with a tax bill on the sale of these items, claiming that they should be subject to use tax.

Under Ohio state law (and in most states), however, there is an exemption available to parties who resale an item to a consumer. The Reds argued that they were reselling the promotional items by including them in the ticket price – you can’t get a bobblehead or other item without buying a ticket. If the club is considered a reseller of the item, it is not a taxable user and doesn’t owe tax. The Commissioner disagreed and the matter went to court.

The case, Cincinnati Reds, L.L.C. v. Testa, Slip Opinion No. 2018-Ohio-4669, was decided in favor of the Reds. Justice Patrick F. Fischer delivered the opinion for the majority.

(You can read the court’s opinion, which downloads as a PDF, here.)

At the hearing, Doug Healy, the Reds’ chief financial officer, testified that the purpose of distributing the bobbleheads and other promotional items is to encourage fans to buy tickets for games that would otherwise not be well attended. Healy explained that the increased ticket revenue more than offsets the cost of promotional items distributed – “[o]therwise we wouldn’t do it.”

The cost of the promotional items is absorbed into the price of the tickets. That is, the price of the tickets isn’t separately stated from the price of the promotional item. You can’t opt out of the promotional item and score a cheaper ticket, and the price of a ticket when the promotional item isn’t so great – a cheap pennant, maybe – doesn’t cost less than the price of an arguably cooler promotional item like a bobblehead.

And if the Reds run out of a promotional item? Healy testified that if that happened, the Reds “will remedy it” by giving another promotional item or complimentary tickets.

The Ohio Board of Tax Appeals (BTA) agreed with the Commissioner that the fans did not pay consideration for the promotional items, which would mean that the Reds were not entitled to an exemption as a reseller. The crux of their argument was that fans pay the same price to attend a game regardless of whether a promotional item is offered and the cost of the promotional item is not included in the ticket price. The BTA agreed and ruled against the Reds.

However, the Supreme Court disagreed with those findings. Healy specifically testified that the costs of promotional items are included in ticket prices and that promotional items are distributed at less popular games. In other words, rather than discount ticket prices for games that aren’t expected to be well attended, the Reds keep the cost of the tickets the same and add a promotional item to lure in fans. The court found, then, that the promotional items were things of value for which fans paid money; the cost is simply included in the ticket price. They are, the court wrote, “an explicit part of the bargain.”

So what does that mean? The transfer of the promotional items from the club to the fans constitutes a “sale” under Ohio state law. That makes the promotional items subject to the sale-for-resale exemption. The Reds are not, therefore, liable for use tax on the promotional items.

And with that, Justice Fischer wrote, “[I]n the familiar words of Marty Brennaman, longtime Reds radio announcer and recipient of the National Baseball Hall of Fame’s Ford C. Frick Award, we determine that ‘this one belongs to the Reds.’”

This morning, I was greeted on my laptop with two words: Draft Day? It seems that my brother is eager to get our fantasy football season going. He’s got a point since the National Football League (NFL) officially kicked off its season last night.

(A petty sister might note that his Patriots lost to her Eagles in the Super Bowl last year, but not me.)

Fantasy football is a big deal in my family. We only play for bragging rights, but many leagues around the country this season will play for money. Still, other sports fans will eschew the fantasy teams altogether and will bet directly on the games (Atlanta was the odds-on favorite last night against Philadelphia).

Just as with gambling, fantasy sports winnings are reportable on your taxes. But – at least for now – fantasy sports are considered games of skill. That means that fantasy winners are treated a little bit different for tax purposes. For example, a fantasy sports winner may receive a form 1099-MISC, Miscellaneous Income, while winners at a casino or gaming house may receive a form W-2G, Certain Gambling Winnings.

(You can read more about taxes and fantasy sports here.)

Of course, gambling winnings are reportable even if you don’t receive a federal form W-2G, Certain Gambling Winnings – either because of the amount or because it’s a friendly wager. A form W-2G is issued when winnings, after the cost of playing, are $600 or more and at least 300 times the amount of the wager; the form will also be issued if winnings are subject to federal income tax withholding, including backup withholding and regular gambling withholding. “Regular” gambling withholding is a flat 25% rate if your winnings from a gambling pool minus the cost of your wager are more than $5,000.

Those gamblers who play simply for fun include their winnings as income on line 21 of the form 1040. According to IRS (memo downloads as a pdf), those are casual gamblers who are “not engaged in the trade or business of gambling.” IRS goes on to note that “[l]ike any other taxpayer, a gambler has the burden of proving that his activities rise to the level of a trade or business.” And it’s time, not dollars, that tend to support the claim. Just as golfer John Daly whose gambling losses topped $90 million (more on his losses here).

The recent Tax Cuts and Jobs Act (TCJA) made changes that could impact both casual and professional gamblers. While all gamblers have to report their winnings, casual gamblers may only deduct their gambling losses as an itemized deduction on Schedule A. Big changes to Schedule A may impact that deduction.

To be clear, miscellaneous deductions which exceed 2% of your adjusted gross income (AGI) were eliminated (including deductions for unreimbursed employee expenses like unreimbursed travel and mileage, as well as the home office deduction). However, deductions for miscellaneous expenses not subject to the 2% threshold remain in place; that includes gambling losses, which you can deduct up to the amount of your winnings.
But even though the deduction remains in place, other changes may affect the ability of many taxpayers to claim gambling losses. Most notably, the standard deduction has significantly increased. For 2018, the standard deduction amounts were boosted from $6,500 for individuals, $9,550 for heads of households (HOH), and $13,000 for married couples filing jointly, to $12,000 for individuals, $18,000 for HOH, and $24,000 for married couples filing jointly. Additionally, restrictions on home mortgage interest (more on that here) and state and local tax deductions (more on those here), making it less likely that certain taxpayers will itemize. The result? Most taxpayers will claim the standard deduction. If you opt to claim the standard deduction rather than claiming the itemized deduction, then any casual gambling loss is, well, lost.

If gambling is your business, gambling-related income and expenses are reported on a Schedule C, which means that you do not have to itemize to claim your losses. However, the TCJA has modified the definition of “gambling losses” under section 165(d) of the Tax Code to include any deduction otherwise allowable in carrying on any wagering transaction.

What that means is that taxpayers whose business is gambling can no longer deduct non-wagering expenses, such as travel to and from a casino, separately from losses. So, for example, a taxpayer with $10,000 in winnings may deduct up to that amount in combined losses and related expenses.

This change applies to professional gamblers for the years 2018 through 2025. Before the TCJA, professional gamblers could deduct travel and other costs related to gambling without regard to wins and losses (that was the rule previously confirmed by the Tax Court in Mayo v. Commissioner).

If, after those changes, you’re still angling to claim a deduction for your gambling losses, you’ll want to keep excellent records. Those records should include the date and location where you were gambling, as well as the amounts and type of wager. That’s easy when you’re at, say, the SugarHouse Casino, but a little more difficult when you’re betting with friends or office workers at the local watering hole. Consider writing those down in a notebook or capturing them on your cell phone so that you can present your tax pro with proof come tax time. Remember: whether you’re rolling dice in Vegas or betting in your living room, when it comes to gambling, the tax rules are the same.

As Paul Pogba celebrated a win in the World Cup for France, the rest of his Manchester United team was making their way to the United States. The club was on their way to play five matches, kicking off with a friendly on Thursday, July 19. Pogba wasn’t the only noticeable high-profile absence: The Red Devils were also missing Alexis Sánchez. The forward was reportedly denied access to the United States due to a tax fraud conviction.

In 2016, Spanish authorities accused Sánchez of committing tax fraud. They alleged that Sánchez set up offshore companies in Chile and Malta to avoid paying tax on nearly $1 million between 2012 and 2013. At the time, Sánchez denied the charges. However, earlier this year, he was found guilty of two counts of tax fraud linked to concealing income from his image rights. As punishment, Sánchez was sentenced to 16 months in prison and fined. In Spain, those who receive a light prison sentence do not usually serve time unless the offense involves a violent crime or if the defendant is a habitual offender. Typically, a light sentence is one under two years, which means that he will only serve probation.

If that sounds like a familiar story, it is. Barcelona’s Lionel Messi and Javier Mascherano were both accused of failing to pay taxes on income tied to image rights. Like Sánchez, both were sentenced to a fine and a prison sentence of less than two years. As with Sánchez, neither will spend time in jail because of the length of the sentence and the type of crime.

What seemed like a problem that he could now put behind him may have turned into something more. Officially, Sánchez was not allowed to travel with the team because of what a spokesperson dubbed “a personal administrative issue.” However, according to a tweet posted by the BBC Sport’s Simon Stone, the problem was a visa issue related to the tax charges.

[ Stone

According to Philadelphia area international law attorney (and soccer dad) J. Christopher Erb, there can be a lot of factors at play when a person is denied entry to the country. However, the issue is likely related to Section 212 of the Immigration and Nationality Act which states, in part, that entry to the country can be denied to “any alien convicted of, or who admits having committed, or who admits committing acts which constitute the essential elements of (I) a crime involving moral turpitude (other than a purely political offense) or an attempt or conspiracy to commit such a crime.” According to Erb:

Fraud is the classic ‘obvious’ case of moral turpitude.

(And yes, Erb is not such a common name that the interview was coincidental. That is my husband.)

There are exceptions to the rule—typically based on age, length of sentencing and type of offense—but none of those appear to apply here.
So what’s next? Erb says that it’s likely that Sánchez would have to apply for a waiver to be allowed into the country. With a waiver, otherwise ineligible applicants may obtain a visa; however, applicants must generally qualify under the waiver provisions of the Immigration and Naturalization Act.
That sounds like what’s happening, as the club has suggested that Sánchez would be joining the rest of the players shortly. However, a request for confirmation made to the club was not immediately returned.

The tale could turn out to be a cautionary one for other European players. Former Real Madrid star Cristiano Ronaldo, the third-highest-paid athlete in the world, is due in the country later this summer as part of the U.S. tour for his new team, Juventus. Like Sánchez, Ronaldo was accused of tax fraud. He agreed to plead guilty to four counts of tax fraud in exchange for a fine and a light sentence. For visa purposes, there is no distinction between a plea and a conviction.

The 2018 FIFA World Cup will come to an end on Sunday when Croatia faces France in the final. The soccer tournament, held in Russia, saw 32 national teams compete on a world stage (31 qualifying teams and the host team) over a month’s time.

Each team brought a squad of 23 players to the tournament. While some of the players were already household names all over the world (think Neymar, Messi, and Ronaldo), others were not as well known outside of their home countries until now, like goalkeepers Danijel Subašić (Croatia) and Igor Akinfeev (Russia).

The well-known faces tend to sport healthy salaries and big endorsements. Messi and Ronaldo landed at #2 and #3, respectively, on Forbes’ highest-paid athlete list, bringing in more than $100 million each. Lesser known players can bring home substantially smaller salaries, depending on where they play and where they live.

Over the past few years, the amount of money that some players pay in taxes – or didn’t pay in taxes – has made the news. (You can read about World Cup soccer players who have been caught up in tax scandals here.)
But exactly how big a bite does the taxman take from players? Depending on the country, top tax rates can range from 13% to over 50%. Here’s a glimpse at the top tax rates for each of the countries in the Round of 16:

A quick peek at the tax rates by country as a bar graph is as follows:

Or here, by number:

  • France (45%)
  • Argentina (35%)
  • Uruguay (36%)
  • Portugal (48%)
  • Russia (13%)
  • Spain (45%)
  • Croatia (36%)
  • Denmark (55.8%)
  • Brazil (27.5%)
  • Mexico (35%)
  • Belgium (53.7%)
  • Japan (55.95%)
  • Sweden (61.85%)
  • Switzerland (40%)
  • Colombia (33%)
  • England (45%)
  • ** U.S. rate for comparison (37%)

(Data was sourced from the Organisation for Economic Co-operation and Development (OECD), individual country revenue sites, and Trading Economics. There may be slight differences between sources – so keep reading.)

There are a few things to note. One, these figures reflect the top tax rates which may reflect the rates paid by soccer stars, but may not, depending on factors like residency (not all players live and work in their home country) and type of income (image rights might be taxed differently than salary, for example).

Top tax rates represent the amount that you will pay on the next dollar of income, but not necessarily the rate that you’ve paid on all income, depending on the tax system. The U.S. income tax system is progressive which means that the rate of tax increases as income increases (more on that here). If you’re single, you pay the same 10% on the first $9,525 as every other single person. Then, you pay 15% on the next $27,000 and 25% on the next $50,000 – the same as every other single person. You only pay the top rate (37%) on income over $500,000. So while the top tax rate is 37% in the U.S., the blended, progressive rate is smaller.

But not all countries have a progressive system: Russia, for example, has a flat tax (even though the country considered a change to progressive taxes as recently as 2014). That means that the same rate applies to all income from the bottom to the top.

Not all income is the same; some may be tax-favored. Capital gains, for example, may be taxed at lower rates even when they are generated by high-income taxpayers. Some countries allow lower tax rates for royalties or image rights, while others, like Russia, may boost rates for certain kinds of unearned income. Still, other income may be sheltered, subject to special tax treaty rules or eligible for an exception (remember the “Beckham law” in Spain?).

In some countries, excise and social taxes are combined to produce the top rate. Following the OECD’s lead, the figures in the charts above generally don’t include those “extra” or all-in taxes, though sometimes they are difficult to segregate. It’s easier to peel away in a country like the U.S. where the top tax rate (37%) reflects an income tax rate which is separate from other taxes like Social Security and Medicare or the Net Income Investment Tax.

Top national tax rates typically don’t include state and local taxes. In the U.S., those can vary, but often add up to less than 10%; some exceptions exist like those 13.3% rates for high-wage earners in California. However, in some countries, state and local taxes can make up a significant chunk of taxes payable: In Sweden, for example, rates can top 30%.

Finally, keep in mind that these tax rates don’t include other taxes like real estate, sales, and property taxes. Those can drive your tax burden up – or down – depending on where you live and work. Property taxes, for example, tend to be twice as high in the U.S. as in other OECD with respect to tax collections, while our sales taxes are often less than the VAT (value-added tax) in many countries.

So where does the U.S. fall in the grand scheme of things? (And no, that’s not throwing shade at our men’s team.) The average tax rate for OECD member countries is around 40%. Sweden has the highest tax rate in the OECD, followed by Denmark and Japan (all of which made an appearance in the Round of 16) with rates over 50%. You can see how the U.S. measures up to other OECD countries, including the OECD average, as a share of gross domestic product (GDP) here. (Spoiler alert: Only Chile, Ireland, Korea, and Mexico ranked lower than the U.S. as a percentage of GDP.)

Differences in tax rates can reflect a host of issues, sort of like how your interpretation of a soccer penalty can be influenced by the angle and the player. That’s why an exact tax rate for one country can vary from source to source, just like a referee’s call, even when the answer seems clear and obvious. Taking all of that into consideration, the tax rates listed here should be enough to give you an idea of the top tax rates in your favorite World Cup countries. Enjoy the final!

On June 14, 2018, soccer’s most famous event, the World Cup, kicked off. The 2018 FIFA World Cup Russia features 32 teams competing over 32 days. Those 32 teams each boast a squad of 23 players, including three goalkeepers, for a total of 736 players. With soccer and tax nearly hand in hand these days, that means that the World Cup rosters are bound to feature some names embroiled in scandal.

Here are eight soccer players in the 2018 FIFA World Cup Russia who have been caught up in tax scandals:

1. Lionel Messi (Argentina). One of the most recognizable soccer stars in the world—despite never having won a World Cup—Messi was initially charged with tax evasion in 2013. Specifically, Spanish tax authorities alleged at the time that Messi’s father used a series of shell companies in tax havens to shield royalties and licensing income from tax. Authorities had alleged that income from lucrative contracts with companies like Pepsi-Cola, Procter & Gamble and Adidas was funneled offshore through an elaborate maze of entities so that Messi and his father could avoid paying income tax in Spain as far back as 2005 (he signed with FC Barcelona in 2001).

Messi maintained that he was innocent throughout the proceedings. Still, shortly after the charges were made public, he took steps to clear his tax debt, making a “corrective payment” of €5 million (US$6.57 million). In 2015, Spanish tax authorities ordered the footballer to stand trial.

At trial, Messi testified that “I was playing football. I had no idea about anything.” Messi also told the court that he did not actively participate in managing his finances. “I trusted my dad and my lawyers,” he explained, claiming that he did not even read documents that he signed. The court didn’t buy it, and in 2016, Messi and his father, Jorge Messi, were found guilty of tax fraud and sentenced to 21 months in prison. The length of the sentence is significant because, in Spain, those who receive a light prison sentence do not usually serve time unless the offense involves a violent crime or if the defendant is a habitual offender. Typically, a light sentence is one under two years which means that the pair would likely serve probation.

Last year, Messi appealed his case to the Spanish Supreme Court; the Court rejected the appeal, confirming Messi’s conviction on tax fraud charges. That means his original punishment stands.

2. Neymar (Brazil). Neymar da Silva Santos Júnior, known simply as Neymar, has also been found guilty of tax fraud for failing to report his earnings. However, Neymar’s case is a little more complicated. At its root, here’s what it involved: FC Barcelona wooed Neymar while he was at another club, and was accused of lying about the amount of the contract to Neymar’s former club (and to the public). The difference in the contract price and the amount paid was allegedly directed to a Brazilian company controlled by Neymar’s father. Spanish prosecutors assert that the payments were disguised to avoid reporting and tax requirements.

Initially, Neymar and his father denied any wrongdoing, suggesting that any resulting tax consequences would be addressed in Brazil. That’s exactly what happened: In 2015, Brazilian Judge Carlos Muta charged Neymar with “omitting sources of income from abroad” from 2011 to 2013, resulting in a tax loss to the government of nearly $20 million. Judge Muta ordered 188.8 million reals (US$47.75 million) of Neymar’s assets frozen.

In 2017, Neymar’s lawyer declared that Neymar was willing to pay a fine of £1.9 million (US$2.49 million) to settle those claims. While Neymar was ultimately cleared of tax fraud, he was levied with a fine of 3.8 million Brazilian reales (US$1.18 million) for actions related to his case. Judge Muta said that Neymar’s conduct “characterizes litigation of bad faith and a detrimental act to the dignity of Justice.”

In 2015, a court in Spain found that there was enough evidence to go to trial over allegations tied to the transfer. Those pegged for prosecution included FC Barcelona, club president Josep Bartomeu and former club president Alexandre “Sandro” Rosell (Rosell resigned in 2014 over the scandal, though more legal troubles followed him). FC Barcelona eventually paid taxes and fines related to the matter in what it called “an error in tax planning.” Neymar had warned that the tax issues could cause him to leave Spain, and in April of 2017, he signed with France’s Paris Saint-Germain.

3. Javier Mascherano (Argentina). FC Barcelona saw another player added to the list of those accused of tax fraud in 2015. In a hearing that took a little more than ten minutes, Javier Mascherano admitted that he failed to pay taxes on earnings for the years 2011 and 2012. Like Messi, Mascherano’s tax woes involve assigning image rights to companies located in tax havens.
Before the plea, Mascherano did not admit any wrongdoing, but he did settle an outstanding tax bill by paying €1.5 million (US$1.69 million) in taxes plus €200,000 (US$225,860) in interest.

Following his guilty plea, Mascherano was fined €815,000 (US$880,078) and sentenced to 12 months in prison (four months for the 2011 charges and eight months for the 2012 charges). The prison sentence is largely ceremonial since, as noted earlier, those who are sentenced to light sentences in Spain generally don’t serve time.

4. Filipe Luis (Brazil). In 2014, Spanish tax authorities set their sites on another soccer transaction: Luis’ move from Deportivo La Coruña to Atletico. The transaction was subject to value-added tax (VAT)—think of VAT like a distant cousin to our sales tax. The tax authorities weren’t so sure that tax had been paid. While the club sorted things out, Luis waited. He was not individually charged with any wrongdoing.

5. Diego Costa (Spain). Diego Costa may be a hero in Spain this week, but 2018 has not been kind to him on the tax front. He is reportedly under investigation linked to unpaid taxes from a lucrative soccer cleat deal.

According to El Mundo, Costa signed an agreement with Adidas worth about €800,000 (US$925,160). The Spanish tax authorities allege that at least half of that amount was not declared as income for tax purposes. The timing, however, complicates matters. The Spanish tax authorities allege that the Brazilian-born Costa signed the contract while he lived in Spain but before he signed on to play for Chelsea. Costa, however, alleges that he was British resident for tax purposes at the time and therefore has no obligation to pay tax in Spain.

Like many of the other soccer players charged with tax fraud, Costa created an offshore structure for his image rights. However, he has not been accused of using the offshore structure for tax purposes (Remember: It’s not illegal to own an interest in an offshore company).

6. Radamel Falcao (Colombia). Radamel Falcao’s chances on the pitch may turn out for the best, but taking a chance in Spanish court did not. In 2018, Falcao was found guilty of tax fraud. He had been accused of defrauding the tax authorities of €822,609 (US$950,697) in 2012 and €4,839,253 (US$5,592,768) in 2013 through the use of—you guessed it—a series of offshore shell companies used to hide income from image rights. Spanish tax authorities charged that the system was created “with the sole aim of hiding from the Spanish taxman.”

In 2017, Falcao settled his outstanding tax liability by making a €8.2 million payment to tax authorities. Like Messi, that wasn’t enough. Falcao was sentenced to a 16-month jail sentence and €9 million fine by a Spanish court for tax fraud. As with Messi, the sentence will likely not result in actual jail time because of the length of the sentence and the type of crime.

7. James Rodriguez (Colombia). What does James Rodriguez have in common with Luis, Ronaldo and Falcao? His agent, Jorge Mendes of Gestifute International. Mendes has been asked to appear in court to testify in tax trials involving Ronaldo and Falcao. He has previously testified that he “never advised players in tax matters.” He has also denied any role in creating shell companies for his clients.

Rodriguez has not been formally charged with wrongdoing, but according to various sources including Der Spiegel, he has been alerted that he is under investigation. A likely target of inquiry? The offshore company that manages his image rights.

8. Cristiano Ronaldo (Portugal). In his first game at the 2018 World Cup, Cristiano Ronaldo scored a hat-trick. One of the most recognizable faces in modern soccer, Ronaldo was accused of failing to pay 14.7 million euros (US$16.5 million) in taxes by funneling income related to image rights (meaning his likeness, the very thing that Ronaldo capitalizes on) through a series of offshore companies.

Ronaldo had appeared immune to the tax allegations that have affecting other famous soccer players, leading some to speculate that there was a conspiracy targeting FC Barcelona players (Ronaldo plays for rival Real Madrid). However, suspicions against Ronaldo were raised after the so-called “Football Leaks”—think Panama Papers focused on soccer—suggested that Ronaldo had underreported his income.

Ronaldo’s management team, Gestifute, has consistently denied the allegations, going so far as to post a statement on their website saying in part that Ronaldo “never has been involved in any conflict with the tax authorities of any country.” The company also said, “In conclusion: the declared amount can be discussed, but it is clear that the football player did not try to evade taxes.”

However, this month, Ronaldo allegedly reached a deal with the Spanish tax authorities. As part of the deal, he will pay €18.8 million (US$21.73 million) in taxes, fines, and interest. As part of the deal, Ronaldo agreed to plead guilty to four counts of tax fraud. In addition to the financial pinch, Ronaldo’s deal means that he will be sentenced to six months in jail for each offense, for a total of two years in prison. Ronaldo will serve the sentence as probation, consistent with the treatment of other nonviolent first offenses.

So, why are so many of these cases? And why are so many tied to Spain? The answer to the first question is likely complicated. In many cases, young players are paid a lot of money very quickly—and they may rely on financial advisors who may convince them that hiding their business dealings, especially when it involves intangible assets (meaning those you can’t physically touch) like image rights, is acceptable. That can lead to complicated, and possibly illegal, tax moves.

The answer to the second question is perhaps a little easier to answer. Years ago, the so-called “Beckham Rule” was made law in Spain to allegedly benefit England’s David Beckham, who moved to Spain to play for Real Madrid. Under prior Spanish law, you could elect to be taxed as a nonresident if you lived and worked in Spain if you met certain criteria. The law was short-lived and wrapped in 2010 (perhaps, not coincidentally, after Beckham left Spain). Most of the recent allegations aimed at soccer players have their beginnings in 2011 and after.