When you’re playing tennis internationally, the taxes you incur at home may not be the same as the taxes you incur abroad. Understanding the different tax requirements for your earnings is an important consideration for your overall spending plan. While taxes are different in every country, there are a number that are fairly common. Here are some of those taxes—and a few key insights to help you prepare for them.
1. Personal income taxes
Whether you win a tournament in the UK, play for a U.S. tennis club or are endorsing a product for a Brazil-based company, you are typically going to owe taxes on your income in the country or state where you earned it. For example, if you win the US Open, you may be expected to pay income tax on your earnings both to the U.S. government as well as to the State of New York, where the tournament is held.
In addition, you may also owe income taxes to the tax authorities in your home country, although many countries have tax treaties with partner countries to avoid double taxing income. For example, Brazil has treaties with a number of other countries that let athletes who live there offset the taxes they paid on earnings abroad. Tax treaties vary greatly between countries, however, so be sure to familiarize yourself with the tax policies and laws of both the location where you made your earnings and your home country.
2. Business entity taxes
Tennis players are different from most other athletes as you typically operate on your own. Even if you play on a club team, you’re likely earning money solo in tournaments and endorsement deals. Whether you choose to operate independently or form a business entity like a limited liability company (LLC) in the U.S., a sociedad limitada unipersonal (SLU) in Spain or a kabushiki kaisha (KK) in Japan, you’re likely going to be taxed accordingly. These obligations may include self-employment tax, corporate tax and local taxes, depending on the type of entity and where it’s located. In addition, if your business entity hires employees, you will likely need to remit payroll taxes to the government.
3. Payment-In-kind taxes
Let’s say you received payment for an endorsement in “swag” in addition to cash -- for example, you received designer clothing, a luxury car or a high-end watch as part of your compensation. Here’s the bad news: You may owe taxes on the value of what you were given. So, you may need to dip into your savings to pay the taxes owed.
4. Property and location taxes
If you own property, whether it’s a small condominium in the town where you grew up or three luxury homes on different continents, you likely owe property taxes. As you evaluate where you want to live and own property, look at the additional cost property taxes will add. You may wish to consider real estate investments in areas where property taxes are lower to reduce your tax liability.
In addition, the location of your primary residence may also have a significant impact on how your income is taxed. The tax policies of your national and regional tax authorities can have a big impact on the taxes you’ll pay on your income and property. It’s a good idea to consult a tax advisor who understands your unique property and income tax situation and the impact your properties can have on your overall tax bill—including the opportunity for any write-offs, deductions or tax relief.
5. Other taxes
As you travel around the world, you may encounter other taxes that you need to pay—and perhaps even collect and remit. For example, value-added tax or sales tax may be added to purchases, even those you make in the course of running your business. If you sell merchandise, you may need to charge customers a value-added tax or sales tax that you, in turn, pay to the appropriate tax collection agency of the country or region in which you are selling the products. Keeping good financial records that include business-related purchases, sales and other transactions is important, especially when it’s time to pay those taxes.
6. Tax incentives
This one isn’t a tax, but it might be important in terms of your overall tax strategy. Certain countries have instituted tax regimes aimed at attracting professional athletes and other high-income earners by offering certain tax incentives to individuals living and working within their country. A well-known example includes Spain’s “Beckham Law.” The conditions for claiming these tax incentives are complex – therefore, it is important to consult with a tax professional.
Find the right team
Planning for taxes is an important part of your career. For tennis athletes, who hail from and play their game all around the world, having the right advisors is essential. One of the most important is an accountant or tax advisor who is well-versed in international tax issues and can help you navigate the various taxes you’ll owe, as well as how to legally mitigate them when possible.
