The World Cup is currently underway in three countries in North America: Canada, Mexico, and the United States. This is only the second multicountry World Cup since 2002, when Japan and South Korea co-hosted. The matches will be held in 16 cities throughout the three countries with the majority being in the United States.
Traveling between the cities and countries itself presents a challenge for the participating teams. But this can also create tax complexities for the teams, players, and staff.
Just dealing with one host country’s tax laws can be complicated for foreigners. If the United States hosted the World Cup on its own like they did in 1994, each participating country and its athletes and staff would have to deal with U.S. income taxes on the money they made while playing in the United States. Generally for foreign soccer players, their U.S. source income would be subject to a flat 30% income tax unless the two countries have a tax treaty which agrees to a lower percentage. Alternatively, athletes can apply for a Central Withholding Agreement (CWA) to be taxed at graduated rates on net income.
To mitigate double income taxation, most countries with income taxes have a foreign income tax credit provision which subtracts the U.S. income taxes paid from their home country’s income tax. However, the foreign income tax credit may not include state income taxes paid, in particular their infamous “jock tax.”
But when multiple countries are involved, things can get really complicated. Without coordination, potentially all three host countries could claim the same income as taxable based on differing domestic rules such as days present, or what they believe is a reasonable method of allocating income to their countries based on the facts and circumstances. Players would then seek foreign tax credits in their home country, but inconsistent sourcing often leads to audits and incomplete relief.
To minimize double (and possibly triple) taxation, the host countries’ respective tax agencies have come to a consensus as to what constitutes a reasonable method to source and allocate prize money and other compensation received by participants of 2026 FIFA World Cup under each of their respective domestic laws. Basically, total compensation paid by FIFA to a participating country is allocated proportionally based on the number of games played in each host country relative to the team’s total matches in the tournament.
In math terms: Taxable income allocation to a country = Total FIFA earnings × (Matches played in that country ÷ Total matches played by the team).
The tax agencies also agree that the same allocation method could reasonably apply to downstream payments from a team to its players or staff. For example, if a team engages an independent contractor for services throughout the period in which the team plays, it would be reasonable for the same allocation factors to be used to allocate the independent contractor’s revenues. The same allocation may apply for payments to the team’s players. For employees of the team that are not players, a time-based allocation factor would be reasonable.
The teams and its players and staff do not have to use the agreed income allocation. They may choose an alternative method if their specific facts and circumstances justify it and if it provides a better tax benefit for them. Also, a taxpayer’s use of the agreed allocation method does not guarantee that they will be not audited by any of the three tax administrations. Taxpayers are encouraged to use allocation methods consistently across all host countries as well as their home countries.
The agreement does not eliminate all issues. Individual players still face state jock taxes, potential filing obligations, and the need for proper documentation such as filing W-8BEN forms and explaining treaty claims on their tax returns.
The tax agreement between the three World Cup host countries, while not perfect, is a welcome step. The benefit to this agreement is that teams and players can plan with greater certainty. The method is straightforward and tied directly to the venue, which is easy to document. It will also discourage teams and players from submitting fact- and circumstance-based allocation amounts which could lead to conflicting arguments from all parties.
Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at stevenchungatl@gmail.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.
The post How The Tax Agencies In The US, Canada, And Mexico Simplified Tax Rules For World Cup Participants appeared first on Above the Law.
The World Cup is currently underway in three countries in North America: Canada, Mexico, and the United States. This is only the second multicountry World Cup since 2002, when Japan and South Korea co-hosted. The matches will be held in 16 cities throughout the three countries with the majority being in the United States.
Traveling between the cities and countries itself presents a challenge for the participating teams. But this can also create tax complexities for the teams, players, and staff.
Just dealing with one host country’s tax laws can be complicated for foreigners. If the United States hosted the World Cup on its own like they did in 1994, each participating country and its athletes and staff would have to deal with U.S. income taxes on the money they made while playing in the United States. Generally for foreign soccer players, their U.S. source income would be subject to a flat 30% income tax unless the two countries have a tax treaty which agrees to a lower percentage. Alternatively, athletes can apply for a Central Withholding Agreement (CWA) to be taxed at graduated rates on net income.
To mitigate double income taxation, most countries with income taxes have a foreign income tax credit provision which subtracts the U.S. income taxes paid from their home country’s income tax. However, the foreign income tax credit may not include state income taxes paid, in particular their infamous “jock tax.”
But when multiple countries are involved, things can get really complicated. Without coordination, potentially all three host countries could claim the same income as taxable based on differing domestic rules such as days present, or what they believe is a reasonable method of allocating income to their countries based on the facts and circumstances. Players would then seek foreign tax credits in their home country, but inconsistent sourcing often leads to audits and incomplete relief.
To minimize double (and possibly triple) taxation, the host countries’ respective tax agencies have come to a consensus as to what constitutes a reasonable method to source and allocate prize money and other compensation received by participants of 2026 FIFA World Cup under each of their respective domestic laws. Basically, total compensation paid by FIFA to a participating country is allocated proportionally based on the number of games played in each host country relative to the team’s total matches in the tournament.
In math terms: Taxable income allocation to a country = Total FIFA earnings × (Matches played in that country ÷ Total matches played by the team).
The tax agencies also agree that the same allocation method could reasonably apply to downstream payments from a team to its players or staff. For example, if a team engages an independent contractor for services throughout the period in which the team plays, it would be reasonable for the same allocation factors to be used to allocate the independent contractor’s revenues. The same allocation may apply for payments to the team’s players. For employees of the team that are not players, a time-based allocation factor would be reasonable.
The teams and its players and staff do not have to use the agreed income allocation. They may choose an alternative method if their specific facts and circumstances justify it and if it provides a better tax benefit for them. Also, a taxpayer’s use of the agreed allocation method does not guarantee that they will be not audited by any of the three tax administrations. Taxpayers are encouraged to use allocation methods consistently across all host countries as well as their home countries.
The agreement does not eliminate all issues. Individual players still face state jock taxes, potential filing obligations, and the need for proper documentation such as filing W-8BEN forms and explaining treaty claims on their tax returns.
The tax agreement between the three World Cup host countries, while not perfect, is a welcome step. The benefit to this agreement is that teams and players can plan with greater certainty. The method is straightforward and tied directly to the venue, which is easy to document. It will also discourage teams and players from submitting fact- and circumstance-based allocation amounts which could lead to conflicting arguments from all parties.
Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at stevenchungatl@gmail.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.
The post How The Tax Agencies In The US, Canada, And Mexico Simplified Tax Rules For World Cup Participants appeared first on Above the Law.
