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New Tax Measures Impact Spanish Sports Industry
Limitation on amortisation of intangible assets for accounting purposes as a deductible expense for corporate income tax purposes
This limitation is established for entities that do not qualify for the incentives available to enterprises of a reduced size, ie, it will apply to companies or groups of companies whose net revenues in the preceding fiscal year exceeded EUR10 million. The limit on deductibility introduced by the new Law is 70% of the depreciation/amortisation charged for accounting purposes. Accordingly, the depreciation/amortisation charge will be tax deductible up to the amount resulting from multiplying the applicable amount, according to the depreciation/amortisation method being used, by 0.7.
In the context of sport, this measure is important because it directly impacts the transfer fees paid by clubs as a result of signing sportspersons, since only 70% of such transfer fees, treated as intangible assets from the club's standpoint, in tax periods commencing during 2013 and 2014, is amortisable for tax purposes.
Limitation of the expense incurred by reason of the termination of employment
Another of the measures introduced by Law 16/2012 is the limitation on the deductibility of the expenses incurred by companies when terminating their workers, whether they have an ordinary or special employment relationship and/or a commercial (independent contractor) relationship (directors or board members).
The measure is equally important in a sports context, because it affects Spanish clubs if they incur expenses due to the termination of employment contracts, whether with players or with members of coaching staff or club personnel. The club will not be able to deduct any amounts exceeding EUR1 million, per person (player, coach, trainer, etc.) or, in the case of professional sportspersons,equal to severance of at least two months' pay received periodically.
Discover more: The impact of new tax measures on Spanish clubs
Apart from the above, other measures introduced by the new legislation may be highly important to clubs and sports corporations, namely, account revaluations, the limitation on deductibility of finance costs, the establishment of a minimum tax prepayment, or the limitation on offset of tax losses. Many large sports clubs hold foreign investors, therefore multinationals in the industry should investigate these measures to clarify how, if at all, they are affected.