Free article section

You are reading a Free article. Apply for a subscription to access all the valuable information on the website Sports Law & Taxation

South Africa: Draft Guide on the Taxation of Professional Sports Clubs and Players Issued: a very promising starting point!

By Dr. Alara Efsun Yazicioglu, LLM[1]   On 27 May 2016, the South African Revenue Service (SARS) published a ‘Draft Guide on the Taxation of Professional Sports Clubs and Players’ (the Draft Guide). Comments by the interested parties, initially expected by 27 June 2016, may be submitted until 29 July 2016.[2] SARS expressly underlined that the Draft Guide is merely a ‘general guide’, i.e. it cannot be considered as an ‘official publication’[3] a ‘practice generally prevailing’[4] or a ‘binding general ruling’[5]. The Draft Guide should, therefore, be considered as a brief summary of the applicable legislation. The Draft Guide elucidates income tax and value added tax (VAT) aspects of the South African tax system with regard to different types of income generated by professional[6] sports clubs and sportspersons. It mainly focuses on players and clubs residing in South Africa. The tax implications for non-resident professional sportspersons are described in an extremely concise manner.[7]   Sports clubs and sportspersons residing in South Africa With regard to professional sports clubs, the Draft Guide examines, by means of detailed explanations and illustrative examples, income tax and VAT implications of the following receipts and accruals: transfer fees; sign-on fees; sponsorships (including sponsorships in kind: VIK); prizes; ticket sales; sale of merchandise and other sundry items; insurance premiums (relating to, for example, sportspersons, training kits, equipment and facilities) paid by clubs; and fringe benefits that clubs may provide to their players with (such as residential accommodation and use of a club-owned vehicle). Concerning professional sportspersons, the Draft Guide analyses taxation modalities of the following receipts and accruals: player salaries and other remuneration; transfer fees; player signing-on fees; image rights payments; sponsorships; prizes (either received directly or indirectly[8]); indemnification payments; bonus payments; income derived from benefit matches; allowances; advances and reimbursements (namely travelling allowance, reimbursements and accommodation); fringe benefits (such as medical expenses, uniforms, transfer costs and personal use of business cellular phones and computers); pension fund contributions, retirement annuity fund contributions and other deductions for players (like agents’ commissions). The Draft Guide also briefly describes the implications of Skills Development Levy (SDL); Unemployment Insurance Fund (UIF) contributions; and donations received by clubs and sportspersons.   Non-resident sports clubs and sportspersons As already mentioned, tax implications for non-resident sports clubs and sportspersons are summarised in an extremely brief manner. The Section[9] of the Guide relating to taxation of non-residents mainly concentrates on the taxation of sportspersons. Only very general VAT information is provided with regard to sports clubs. The information given by the Guide can be summarised as follows:
  • Non-resident sportspersons are subject to a 15% withholding tax on their gross income[10] derived from any ‘specified activity’[11]. The tax is a final tax, which must be withheld and remitted to SARS by any South African resident who is liable to pay a non‑resident sportsperson.
  • Not subject to the withholding tax are sportspersons who are employees of a resident South African employer and sportspersons who are physically present in South Africa for more than 183 days in aggregate in any 12-month period commencing or ending during the year of assessment.
  • VAT registration threshold is currently R1 million. Non-resident sports clubs and independent sportspersons must register for VAT purposes only if they carry on the enterprise activity continuously or regularly ‑ wholly or partly ‑ in South Africa. Sportspersons employed by a sports club are not under the obligation to register for VAT.
  • For more information, the Office of Non-Resident Entertainers and Sportspersons may be contacted.
  The Draft Guide constitutes a very promising starting point The Draft Guide constitutes a very promising starting point to remedy the uncertainty currently affecting the taxation of international sports events. As a matter of fact, lack of clarity, which translates into uncertainty, forms one of the most significant challenges in this area. For taxation purposes, two types of international sports events may be distinguished: (i) sports events benefitting from specific exemption regulations (the so-called ‘mega’ or ‘large-scale’ sporting events, such as the Olympics and FIFA World Cup) and (ii) sports events that do not benefit from such exemptions. With regard to sports events benefitting from specific exemption regulations, the main reasons of the uncertainty of the applicable tax treatment can be enumerated as follows:
  1. there is a lack of international practice: tax exemption regulations vary to a great extent from country to country and no effort to develop a certain international standard has been made so far;
  2. there is a lack of national practices: the regulations are enacted specifically for one event, and thereby their exact scope cannot be precisely determined until the taxation effectively occurs;
  • in some cases, it may not be clear whether the Host State will indeed provide for specific exemptions or not.
A similar level of uncertainty also exists for international sports events that do not benefit from specific tax exemptions. Taxpayers deriving an income from such events are usually under the obligation to hire local professionals to assist them, even in the presence of a double tax treaty based on the OECD Model Convention[12]. This is due to the fact that taxation modalities provided by the Host State’s national legislation and the interpretation of the applicable double tax treaty’s provisions by that State are pertinent for the taxation of the income derived by the taxpayers concerned. Such lack of clarity constitutes a serious burden on the taxpayers generating income from a number of international sports events on a regular basis. Not only sportspersons and sports clubs, but also other persons, such as the rights-holders of the events concerned, broadcasting companies and hospitality providers, are affected by this phenomenon. One of the significantly efficient ways of counteracting this problem is the publication of detailed guidelines that elucidate tax implications of income derived from an international sports event taking place in the territory of the State concerned, i.e. the Host State. To this end, a detailed guide written in a language that is comprehensible by taxpayers, which avoids legal and technical jargon, can be extremely useful. The South African Draft Guide seems to be a very promising starting point. If the same level of details and precision as the explanations provided for resident sports clubs and sportspersons may also be reached for non-resident sports clubs and sportspersons, along with other relevant categories of taxpayers, the Draft Guide may transform itself into a truly exceptional tool. South Africa, that pioneered the creation of special intellectual property rights that can be invoked for any “major sports event” with its Merchandise Marks Amendment Act in 2002[13], may be once more on the verge of initiating a very desirable ‘revolution’ in the sports world!   [1] The author can be contacted by e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it.. [2] Comments may be submitted by e-mail to the following address: This email address is being protected from spambots. You need JavaScript enabled to view it.. [3] An official publication is defined as “[…] a binding general ruling, interpretation note, practice note or public notice issued by a senior SARS official or the Commissioner” in (Chapter 1) Section 1 of Tax Administration Act 28 of 2011. [4] A practice generally prevailing is defined as “[…] a practice set out in an official publication regarding the application or interpretation of a tax Act” in (Chapter 2) Section 5 (1) of Tax Administration Act 28 of 2011. [5] A binding general ruling is defined as “[…] a written statement issued by a senior SARS official under section 89 regarding the interpretation of a tax Act or the application of a tax Act to the stated facts and circumstances” in (Chapter 7) Section 75 of Tax Administration Act 28 of 2011. [6] The Draft Guide explicitly excludes amateur players and clubs from its scope [The Draft Guide, Preface, p. i]. [7] Approximately one page out of 59 pages refers to non-resident sports clubs and sportspersons. [8] The Draft Guide distinguishes between two types of indirect accruals: (i) the prize is paid to the club for its benefit but is subsequently distributed to the player(s) and (ii) the prize is paid to the club for the benefit of the player(s) [the Draft Guide, p. 33]. [9] Section 10 [the Draft Guide, p. 58-59]. [10] See page 2 of the Draft Guide regarding gross income. [11] ‘Specified activity’ is defined as “any personal activity exercised in the Republic or to be exercised by a person as an entertainer or sportsperson, whether alone or with any other person or persons” in the South African legistation [the Draft Guide, p. 58]. [12] OECD Model Tax Convention on Income and on Capital is the most frequently used Model Treaty. [13] Kelham Alex, Tackling Ambush Marketing of the Olympic Games and Paralympic Games – London 2012: A Case Study in Lewis Adam/Taylor Jonathan (Eds), Sport: Law and Practice, 2nd edition, Tottel Publishing, 2008, p. 1396.  

Issues of the Journal

Interesting article?

Take your own subscription to get easy online access to all valuable articles of Sports Law & Taxation
The Journal

Sports Law & Taxation features: articles; comparative surveys; commentaries on topical sports legal and tax issues and documentation.

The unique feature of Sports Law & Taxation is that this Journal combines  up-to-date valuable and must-have information on the legal and tax aspects of sport and their interrelationships.

Global Sports Law and Taxation Reports feature: articles; comparative surveys; commentaries on topical sports legal and tax issues and documentation.

The unique feature of Global Sports Law and Taxation Reports is that this Journal combines for the first time up to-date valuable and must-have information on the legal and tax aspects of sport and their interrelationships.

The Editors

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

Mr. Kevin Offer
Hardwick & Morris LLP, London


In partnership with

Screenshot 1



Nolot BV
St. Jorisstraat 11
5211 HA  's-Hertogenosch
This email address is being protected from spambots. You need JavaScript enabled to view it.