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SARS Issues Guide For Professional Sports Players

by Lorys Charalambous,, Cyprus

01 June 2016

The South African Revenue Service (SARS) has published a draft guide on the most commonly experienced tax issues and situations regarding the income and expenditure of professional sports clubs and players in South Africa.

It is pointed out that the professional sports industry is one of the fastest growing industries internationally. The guide focuses primarily on South African resident players and clubs, and not on foreign athletes.

For example, with regard to transfer fees, the contract that a club has with a player will, in most circumstances, be an "asset" as defined for capital gains tax (CGT) purposes. When the selling club disposes of its right to demand performance from the contracted player (an asset) at a higher price (proceeds) than it paid to acquire it, a CGT liability arises.

Similarly, for the acquiring club, the transfer fee paid in the contract will be paid to expand its income-producing capacity. The expense will be of a capital nature, and no tax deduction of the transfer fee will be allowed to the club.

The position of visiting foreign professional players is also briefly touched upon in the guide. Under the South African tax code, amounts paid to foreign sportspersons for specified activities in South Africa are subject to a withholding tax at a flat rate of 15 percent. The tax is a final tax.

While the liability for the tax rests on the foreign sportsperson, it is also required that any resident who is liable to pay a foreign sportsperson for carrying on such specified activities must withhold the tax from that payment, and remit it to SARS before the end of the month following the month during which that amount was deducted or withheld.

However, the withholding tax does not apply to players who are contracted employees of a resident South African club employer, or to players physically present in South Africa for more than 183 days in aggregate in any 12 month period commencing or ending during the year of assessment. These players will be subject to normal income tax on any income derived by them from a source in South Africa.

Comments on the draft tax guide should be forwarded to SARS by June 27, 2016.

TAGS: individuals | capital gains tax (CGT) | South Africa | tax | business | revenue guidance | employees | corporation tax | tax authority | sportsmen | tax rates | withholding tax | individual income tax | Africa

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