Tax and Residency: Challenges for International Athletes

By Panayiotis Constantinou, The Sports Financial Literacy Academy, Nicosia, Cyprus

Introduction

In a globalized sporting world, athletes cross borders more frequently than ever—signing contracts in new countries, training in multiple locations, and earning from global sponsorships. But whilst a cross-border career brings visibility and wealth, it also comes with a less glamorous challenge: tax residency and international compliance.

From footballers playing in four countries in one year, to tennis stars touring the world, international athletes are often caught in a web of overlapping tax laws. The results can be severe: double taxation, unexpected penalties, or damaging headlines.

This Post explains the key challenges that athletes face when navigating tax residency rules and offers practical strategies to stay compliant, protected, and in control of their tax affairs.

1 | You Can Be Taxed In More Than One Country

In 2019, tennis legend Rafael Nadal was investigated by Spanish tax authorities, despite structuring some of his income through companies abroad. Even though he spent considerable time outside Spain, authorities argued that his “center of economic interest” remained in the country—triggering full tax liability on his global income.

This is the reality for many athletes:

• Simply training or competing abroad does not exempt you from home country taxes.
• Many countries apply residency rules based on time spent, ties to the country, or where income is earned.
• You may be liable in multiple jurisdictions at the same time.

🔹 Tip: Keep a detailed travel log, note where each contract is performed, and get expert advice on dual residency rules.

2 | “183 Days” Is not a Free Pass

The “183-day rule” is often misunderstood. Athletes assume that staying less than six months in a country means no tax liability. Unfortunately, it is not that simple.

Consider the case of Cristiano Ronaldo during his time in Spain. Although his image rights income was generated globally, Spanish authorities ruled that, because he was resident in Spain, he owed taxes on all income, regardless of where it originated. The result? A high-profile legal battle and a hefty financial settlement.

Countries can claim tax jurisdiction based on:

• Your primary home or “habitual abode”
• Where your economic activities are based
• Where your family resides
• Where your image rights company is registered

🔹 Tip: The number of days that you spend in a country is only one factor. Tax residency is a multi-factor test, and each country defines it differently.

3 | Double Taxation is Real (But Avoidable)

When NBA players play overseas during off-seasons, or when footballers transfer from clubs mid-year, income is often taxed twice: once where it is earned, and again in their home country.

That is where Double Taxation Agreements (DTAs) come in. These are treaties between countries to prevent athletes (and others) from paying tax on the same income in two places.

However, DTAs are:

• Not always in place between the countries you operate in
• Complex, requiring documentation and timely declarations
• Subject to interpretation by each tax authority

🔹 Tip: Before signing with an international club or sponsor, ask your accountant to map out which DTAs apply and how they affect your total tax exposure.

4 | Image Rights Can Trigger Extra Scrutiny

Image rights income—payments for the use of your name, image, or likeness—is often a grey area. Athletes commonly receive these through offshore entities to optimize tax efficiency. But tax authorities are increasingly scrutinizing these setups.

In the UK, former England captain Wayne Rooney was investigated for how his image rights were structured during his time at Manchester United. The issue was not criminal activity—it was interpretation.

If tax authorities decide that the company is a shell, or that income should have been declared personally, they can:

• Reclassify the income as taxable salary
• Impose interest and penalties
• Open investigations into prior years

🔹 Tip: Ensure that your image rights company has substance—real activity, clear contracts, and a legitimate business purpose.

5 | Moving Countries does not mean Starting Again

Athletes often relocate to reduce tax liability—but the benefits depend upon careful timing and proper exit planning.

When Formula 1 driver Lewis Hamilton moved to Monaco, a well-known tax haven, he did not simply “flip a switch.” UK tax authorities require clear proof of non-residency, and any income earned, whilst still technically resident, remains taxable in the UK.

Changing tax residency involves:

• Cutting ties with your previous country (home, bank accounts, contracts)
• Establishing clear, documented presence in your new jurisdiction
• Navigating exit taxes, which some countries apply on capital gains before departure

🔹 Tip: Plan relocations months in advance. Seek legal guidance to ensure that your move is recognised for tax purposes—not just PR headlines.

Final Word: Do not Let the System Catch you Offside

Tax laws and residency rules are not designed for athletes. They are rigid, slow, and often out of sync with a modern sporting career. That is why athletes must treat tax strategy as part of their professional toolkits—not something to handle after the season ends.

Track your days. Document your income. Structure your affairs with clarity and integrity. Work with international tax advisors who understand athlete-specific challenges.

Because, when it comes to global tax compliance, the cost of ignorance is not just financial—it is reputational. And, in the age of headlines, that may be the biggest price of all.

For further information, log onto the Sports Financial Literacy Academy website at: ‘www.moneysmartathlete.com’