More than half the countries that have qualified for the World Cup are facing additional costs and potential losses due to Fifa’s failure to agree a blanket tax exemption with the United States government and significant variance in the host country’s international tax treaties.
As a not-for-profit organisation Fifa has had tax-free status in the US since the 1994 World Cup, but that exemption does not apply to all of the 48 qualifiers, whose national associations must pay a range of federal, state and city taxes on their earnings from the tournament this summer.
The Guardian has learned that the tax burden will fall disproportionately on many of the smaller national associations, whose governments do not have a tax treaty with the US.
Of the 48 World Cup qualifiers, 18 are countries that have signed a Double Taxation Agreement (DTA) with the US, which exempts their delegations from paying federal taxes, most of whom come from Europe. Other than co-hosts Canada and Mexico, the only non-European countries who have signed DTAs are Australia, Egypt, Morocco and South Africa.
As a result many of the smallest countries at the World Cup such as tournament debutants Curaçao and Cape Verde will have a potentially larger tax liability than England and France, whose governments have signed DTAs.
The exemption does not apply to players’ earnings, as under federal law athletes and artists are obliged to pay tax when they perform in the US, but does cover back-room staff and coaches, who at international level receive far higher payments from their federations in any case.
The Guardian reported in February that several European federations feared losing money at the World Cup due to high costs, and the tax issue has meant that teams from elsewhere have even bigger concerns.
Despite the significant variance in tax liabilities Fifa’s operational budget for each of the 48 teams is fixed at $1.5m.
As a consequence of the expansion of the World Cup to 48 teams, the daily allowance for living expenses given to each delegation member has been reduced from $850 in 2022 to $600, despite higher travel and hotel costs in the US. The Qatari government also granted tax exemptions to all 32 national associations with teams at the tournament.
“The teams that come from more advanced, sophisticated jurisdictions that have a tax treaty with the US, such as England and Spain, will have much lower costs than smaller countries such as Curacao and Haiti, for example,” said Oriana Morrison, a tax consultant who has advised the Portuguese and Brazilian federations, the latter of whom will not benefit from a DTA.
As a result Carlo Ancelotti, head coach of the Brazil national team, will have to pay tax on his earnings in both Brazil and the US, whereas Thomas Tuchel, the manager of England, will only be taxed in the UK.
In reality the Brazilian Football Federation is likely to cover Ancelotti’s extra tax bill, but the double taxation issue will cause huge problems for smaller associations. The US federal corporate tax rate is 21 percent, while for higher-rate tax players such as international footballers and coaches income tax is 37%.
“Many of the smaller teams, ones for whom this kind of windfall would have made a huge difference to their football industries, are going to be penalised with massive US tax bills,” Morrison said. “That is money that could have developed their football industries locally a lot better, but it’s going to stay in the US.
“There’s a huge discrepancy. It’s going to cost most non-European countries a lot of money to go to the World Cup.”
To complicate matters further Canada and Mexico have granted tax exemptions to all associations, so teams with group games in those countries will have lower bills.
In addition the levels of state taxation vary significantly. There is no state tax at all in Florida, where seven games will take place in Miami, whereas it is 10.75% in New Jersey, whose MetLife Stadium will stage the final, and 13.3% in California, where Los Angeles and San Francisco will host games.
Fifa declined to comment, but sources at the world governing body said they are working will all the national associations to provide help and assistance on tax issues.
