According to the Income Tax Law, certain advantages are provided for the taxation of wages and payments deemed as wages paid to athletes compared to normal employees. While income tax is withheld at a fixed rate on payments made to athletes, income tax is withheld at a progressive rate on wages paid to regular employees. Similar tax advantages provided to athletes are also provided to sports clubs and sports joint stock companies, and if they declare and pay the tax withheld from athletes to the tax office on time, the amount paid will be refunded to them to be used in the specified areas.
1. TAXATION OF WAGE PAYMENTS TO ATHLETES
Pursuant to Articles 61 and 62 of the Income Tax Law, payments and benefits provided to athletes under the name of transfer fee or other names are considered as wages and those who
provide these payments and benefits are considered as employers.
Article 61 of the Income Tax Law stipulates that payments and benefits provided to athletes under the name of transfer fee or other names are also within the scope of wages. However, taxation of athletes by withholding tax is made by applying fixed rate withholding. Wage payments made to athletes may be in the form of monthly salary, premium, bonus, transfer fee, as well as benefits such as free of charge vehicles, housing, etc.
According to the Income Tax Law, payments and benefits provided to athletes under the names of transfer fees or other names are considered within the scope of wages, but unlike other employees, they are not taxed according to the progressive tax tariff in accordance with Article 94 of the Income Tax Law, but through fixed-rate withholding tax in accordance with the provisional Article 72.
According to this;
(1) Until 31/12/2028, income tax is withheld at the following rates from wages and payments deemed as wages made to athletes.
a) In sports subject to league system; 1) 20% for the top league,
2) 10% for the second leagues,
3) 5% for those in other leagues,
b) 5% of the payments made to the athletes in sports branches that are not subject to league procedure and payments made to national athletes in return for their participation in international competitions.
(2) No additional withholding shall be imposed on these payments within the scope of Article 94. In the event that the total income within the scope of this article exceeds the amount in the fourth bracket of the tariff specified in Article 103, such income shall be declared with an annual declaration. In the event that an annual declaration is submitted, the taxes withheld according to this Law shall be deducted from the income tax calculated on these declared incomes, provided that they have been paid to the tax office by those responsible for withholding.
In the event that the total amount of wage income obtained by all athletes as of 1/1/2020, based on the athlete contracts that became valid after 1/11/2019 or renewed after this date, exceeds the amount in the fourth bracket of the tax tariff (3.000.000 TL for 2024), these incomes must be declared with an annual income tax declaration. However, until the expiration of the contracts that have been concluded before 1/11/2019, no annual declaration will be made for the wage income obtained within the scope of these contracts, regardless of the amount, and the withholding made will be the final tax.
Declaration Procedure:
With the Law No. 7194, the second paragraph of the provisional Article 72 of the Income Tax Law No. 193 was amended as follows: “No further withholding is made on these payments within the scope of Article 94. In the event that the total income within the scope of this article exceeds the amount in the fourth bracket of the tariff written in Article 103, these incomes are declared with an annual declaration. In the event that an annual declaration is submitted, the taxes withheld according to this Law shall be deducted from the income tax calculated over these declared incomes, provided that they have been paid to the tax office by those responsible for withholding.” The Income Tax General Communiqué with serial number 311, in which the necessary explanations on the subject were made, was published in the Official Gazette dated 27/5/2020.
Accordingly, pursuant to the provisional Article 72 of the Income Tax Law, wages and payments deemed as wages made to athletes are taxed through withholding. In order to be applied to the wage payments made as of 1/1/2022, it is possible to apply the wage exemption regulated in subparagraph (18) of the first paragraph of Article 23 of the Income
Tax Law once to the total wage payments made to the athletes in the relevant month.
In case of income from different employers; If the athletes receive wage from another employer, the exemption should only be applied to the highest wage.
If There is No Contract;
If the total amount of wage income earned by athletes working without an sport contract exceeds the amount (3.000.000 TL for the year 2024) in the fourth bracket of the tariff written in Article 103 of the Income Tax Law, these incomes will be declared with the annual income tax declaration in any case. In case a declaration is not filed for the wage earned by the athletes, the taxes paid by withholding will be the final tax. In case an annual declaration is filed, it will be possible to deduct the taxes withheld in accordance with the provisional article 72 of the Income Tax Law from the calculated income tax, provided that they are deposited to the tax office.
Status of E-Sports Players:
Within the framework of the Revenue Administration’s existing special instructions and practices regarding the taxation of payments made by a sports club association’s economic enterprise to e-sports players registered to the e-sports club, it is not possible to consider the wage payments made to e
sports players registered to the e-sports club established by the association as wage payments made to athletes within the scope of the provisional Article 72 of the Income Tax Law, and they should be subject to income tax within the framework of the provisions of Articles 61, 63, 94, 103 and 104 of the same Law.
Accordingly, the Revenue Administration considers e-sports players as players, not athletes, for taxation purposes. In this context, the payments made to e-sports players registered to a sports club are considered as wages. If the e-sports player plays for a team, it should be considered as wages. If he/she plays individually outside the team, he/she should be taxed as a self-employed person. In summary, wage payments made to e-sports players who are registered to an e-sports club should be subject to income tax withholding in accordance with Article 94 of the Income Tax Law, not as wage payments made to athletes within the scope of temporary Article 72 of the Income Tax Law.
2. REFUND OF INCOME TAX DEDUCTED FROM ATHLETES’ WAGES THROUGH WITHHOLDING TO SPORTS CLUBS AND SPORTS JOINT STOCK COMPANIES
The “Regulation on the Refund of Income Tax withheld from Athletes’ Wages” prepared jointly by the Ministry of Treasury and Finance and the Ministry of Youth and Sports was published in the Official Gazette dated 22.07.2023.
This Regulation covers the refund of the income tax withheld from the wages paid to the athletes by the sports clubs and sports joint stock companies registered by the Ministry of Youth and Sports and declared to the relevant tax office within the legal period and paid on due date to the special accounts opened by the relevant employers, the establishment and administration of the special account, the use and audit of the amounts transferred to this account and other procedures and principles regarding the implementation.
Who can benefit;
Sports clubs and sports joint stock companies registered by the Ministry of Youth and Sports can benefit from the refund of income tax withheld from athlete wages. In determining the income tax to be refunded, only the income tax amounts withheld on the wages paid to the athletes within the scope of the first paragraph of the provisional Article 72 of the Income Tax Law and declared and paid to the tax office in due time will be taken into consideration.
Payments and benefits provided to employees who are subject to an employer and who work for a specific workplace in return for services and benefits that can be represented by money are taxed within the scope of wages. Payments and benefits provided to athletes under the names of monthly salary, success fee, match fee, signature fee, image right and other names related to these activities are considered within the scope of wages according to Article 61 of the Income Tax Law. Taxes withheld from the wages of sports personnel other than athletes who are subject to withholding, coaching personnel and personnel working in administrative services, support services and other duties are not within the scope of the refund application according to the provisional Article 72 of the Income Tax Law.
Uses of the Amounts Transferred to the Special Account
In order to collect special account revenues, sports clubs and sports joint stock companies are required to open one or more accounts in public capital banks established in Turkiye.
The income tax amounts transferred to these accounts by the tax offices and the income obtained from the accumulated interest of the amounts in this account constitute the resources of the special accounts. The amounts transferred to the employer’s special account can only be used for;
a) Gross payments considered as wages and wages made to athletes engaged in sports activities in amateur sports activities and youth setup sports training facilities, their coaches and other sports personnel,
b) Expenditures of the athletes, coaches and other sports personnel within the scope of subparagraph (a) of this paragraph for food, accommodation, travel, health, education and training expenses related to their sporting activities, as well as for preparation camps, competitions, materials and equipment, sports federation visa, license, registration and
participation expenses related to amateur and youth setup activities,
c) Expenditures for the construction of youth setup sports training facilities established or to be established by sports clubs and sports joint stock companies for the development of amateur sports activities and the training of athletes, and for the operation and maintenance of these facilities, including the wages of the personnel working in these facilities
Which activities are considered amateur sports activities?
Activities related to the youth setup teams of the super league, first league, second league and third league organized by the Turkish Football Federation in football are considered within the scope of amateur sports activities.
Is There an Upper Limit?
Payments made to athletes, their coaches and other sports personnel in amateur sports activities and youth setup sports training facilities cannot exceed three times the amount in the third income bracket of the tax tariff written in Article 103 of the Income Tax Law No. 193 for each athlete, coach and other sports personnel annually. For the year 2024, the income bracket for wages in the third income bracket of the tax tariff is 870,000 TL. In this case, the amount that can be paid annually for each athlete, coach and other sports personnel cannot exceed (870.000X3=) 2.610.000 TL.
Can Transfers be Made to Subsidiaries? The sports club and the sports joint stock companies established as a subsidiary or affiliate of this sports club can transfer the amounts returned to the sports clubs and sports joint stock companies, which are taken into the special account and cannot be spent, to be spent for the same purpose among themselves.
Expenditures Made Before the Refund: Provided that they are within the scope of the expenditures specified in this article, the expenditures made by sports clubs and sports joint stock companies before the refund is received can be covered from the amounts transferred to the special account afterwards.
Refund Conditions and Procedure: The income tax levied on the declarations submitted after the legal period, including the declarations submitted with regret, except for the declarations for correction submitted within the legal period regarding the taxes withheld on athlete wages and which must be declared, will not be refunded.
The withholding amounts withheld by the relevant employer on the wages paid to the athletes and paid by declaring with withholding and premium service declaration are transferred to the special account opened on behalf of the relevant employer by the tax offices within five business days following the payment by making a refund with a correction receipt.
Accounting and Attachment Guarantee: In the refunds to be made by the tax offices, the provision of Article 23 of the Law No. 6183 on the Procedure for Collection of Public Receivables does not apply. In other words, tax offices will not apply the accounting provisions of Law No. 6183. In addition, the amounts in the special account cannot be pledged or attached except for the receivables within the scope of the assessments made for the misuse specified in the Regulation.
Audit and Misuse:
The refund amounts transferred to the special account and the expenditures made from this account are not taken into account as income, expense, discount or cost in income and corporate tax applications.
The accumulated interest, expenditure and all kinds of records and accounting transactions
related to the amounts transferred to the special account shall be kept in a way that will allow them to be monitored separately within the records and accounting transactions of the relevant sports club or sports joint stock company.
All transactions made within a year regarding the special account shall be audited at least once a year by the commission or commissions determined by the Ministry of Treasury and Finance and the Ministry of Youth and Sports.
Tax refunds that are misused from the special account shall be assessed as income (withholding) tax for the taxation period in which they are misused, on behalf of the taxpayer for whom the special account is opened, by imposing a tax loss penalty in accordance with the principles of the Tax Procedure Law No. 213 and a default interest shall be calculated.
