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Netherlands: Pension fund for soccer players: liable for correct withholding of wage tax on refunds to players who are or become entitled to 30% deduction rule

INTRODUCTION In the Netherlands, professional soccer players have to participate in a dedicated Pension Fund. Their contributions are tax deductible, and the later payments are subject to income tax. In the Pension Fund reserves are, on an individual basis, formed for financial support to retired soccer players and their family members. Foreign or incoming soccer players are under certain conditions entitled to a specific beneficial income tax treatment: they are entitled to receive 30% of their gross income as fictitious reimbursements of extra territorial costs (and therefore tax-free). Regarding players which are entitled to the 30% deduction rule, it is possible to ask for an exception for the otherwise obligatory participation in the Pension Fund. THE FACTS In case the exception to participate in the Pension Fund is allowed for, the Pension Fund makes a refund of already made contributions. This refund is made to the clubs, who subsequently pay the amounts to the players. In this case the clubs had applied the 30% deduction rule to the payment of these amounts and therefore had withheld less wage tax than would have been applicable if the full refund was treated as taxable wage. Following an audit the Netherlands tax authorities denied the reduction of the taxable base applied by the clubs, and they subsequently imposed a reassessment on the fund. THE ISSUE The issue was whether the amount of the reassessment was correct, and whether this reassessment could be levied from the Fund (rather than the club or the player himself). THE DECISIONS The Lower Court, The Court of Appeal and the Supreme Court did to certain extends reduce (or confirm earlier reductions) the amounts of the reassessments and fines. Application of the 30% deduction rule to these payments was not permitted. All Courts also all held or confirmed that indeed the Pension Fund was in principle responsible for the correct withholding of wage taxes on the payments to the players. The fact that the payment (as well as the previous withholding of premiums) went through the clubs (as employers of the players) was held to be no factor that would or could lead to a different conclusion.
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The editors of  the Journal Sports Law & Taxation are Professor Ian Blackshaw and Dr Rijkele Betten, with specialist contributions from the world's leading practitioners and academics in the sports law and taxation fields.

The Editors

Managing editor
Dr. Rijkele Betten

Consulting editor
Prof. Dr. Ian S. Blackshaw

Editorial board

Prof. Guglielmo Maisto
Maisto e Associati, Milano

Dr. Dick Molenaar
All Arts Tax Advisors, Rotterdam


Mr. Kevin Offer
Hardwick & Morris LLP, London

Mr. Mario Tenore
Maisto e Associati, Milano


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