Reasons Ronaldo, Messi and other top players evade taxes

Cristiano Ronaldo’s tax issue with the Spanish authorities is finally coming to a close with prosecutors approving the deal for the Juventus forward to pay €18.8 million, sources close to the player confirmed. He will accept responsibility for four different breaches of Spanish tax laws and an automatically suspended two-year prison sentence.

Sources close to Ronaldo’s camp confirmed last month the terms of the deal agreed with prosecutors at the tax agency, and on Thursday the sources said that Hacienda chiefs signed off on the deal, which comes at the end of over two years of negotiations between the various parties involved. The Hacienda prosecutors argued that Ronaldo and his advisers used a network of companies in various countries including Ireland and the British Virgin Islands to evade paying €14.7m in taxes due on “image rights” income earned between 2011 and 2014.

During a 90-minute court hearing in the Spanish capital last July, Ronaldo strongly rejected any wrongdoing and told judge Monica Gomez Ferrer that he felt victimised by the Spanish authorities. The former Manchester United player also maintained that such treatment played a part in his desire to leave Madrid.

The final agreement between Ronaldo’s camp and the prosecutors at the tax authority includes an acceptance that €5.7m is owed in taxes on his image rights income, along with a further €13.1m in fines as interest.

Over the past year, football fans have become used to seeing the trio caught up in accusations of tax fraud and other financial crimes by the Spanish courts. Spanish courts have recently cracked down on tax evasion among leading footballers, following the lifting of the so-called “Beckham Law” that allowed them to curb their taxes. Barcelona’s Lionel Messi was handed a 21-month prison sentence in 2017 on similar charges but under Spanish law was able to exchange the penalty for a fine.

And they are not the only players in the crosshairs of the Spanish judiciary. In 2016, Lionel Messi’s Argentina and Barcelona team-mate, Javier Mascherano, received a one-year suspended prison sentence for tax fraud. Lionel Messi and father Jorge were last year convicted of defrauding the Spanish state of €4.1m (£3.6m; $4.6m) in unpaid taxes on the striker’s image rights, controlled by offshore companies in Belize and Uruguay. The pair were both handed 21-month jail terms in a ruling recently confirmed by Spain’s supreme court.

Now the original Barcelona trial court must decide whether the sentences should be suspended in accordance with Spanish custom for first-time offenders whose prison terms do not exceed two years. Prosecutors have asked for a two-year sentence and a €10m fine for Neymar, who was cleared of fraud but ordered to stand trial over alleged corruption in his 2013 move from Brazilian club Santos to Barcelona.

Now Ronaldo has become the third and final member of the elite La Liga trio to face criminal accusations, after prosecutors announced they were pursuing the 32-year-old former Manchester United man on four counts of tax fraud.

Soon after David Beckham joined Real Madrid in 2003, he was able to enjoy a new tax-exemption scheme aimed at attracting foreign talent to Spain across all sectors. That scheme became known as the Beckham Law, when he became one of the first players to sign up to a six-year-long tax ceiling of 24%, roughly half what Spaniards paid on six-figure-plus incomes.

Spain was in the midst of an unprecedented economic boom, a perfect playground for “galacticos” of the likes of Zinedine Zidane and Luis Figo, before the arrival of Cristiano Ronaldo and the emergence of Barcelona prodigy Lionel Messi. But in 2010 the Beckham Law was scrapped for salaries of more than €600,000, and since then tax inspectors have begun to wise up to the use of complex financial operations using offshore shell companies to get around tax laws.

“The line between avoidance and evasion is very fine in these cases. In the past few years Spain’s tax agency has intensified its control over footballers and their companies, checking to see if they are mere fronts or whether they are really active economically,” explains Carlos Cruzado, president of tax inspectors’ union Gestha.

In 2005, a special law was passed for foreigners coming to work in Spain on an employment contract with a Spanish company. According to this law, a person is taxed at 24% of his/her income. This law was dubbed “Beckham’s Law”, after David Beckham became one of the first beneficiaries of this law. This law has been further modified, and had come under major scrutiny in 2009.

However, in an ironic twist, professional footballers were excluded from this scheme in 2015. This led to footballers having offshore accounts in a bid to hoodwink the authorities into believing that their income was not derived on Spanish soil. This is the major reason why you’ll find that all the tax evasion scandals that come up in the newspapers are in the timeline of 2009–2014. This is because, during that period, there was a lot of confusion regarding the prevalent law, which has led to footballers being accused of fraud.

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