Taxation of athletes can seem pretty simple and self-explanatory but if we look more into the problems of this kind of taxation, we can see that the are many pitfalls and it is more complicated than it might seem. Several judgements of the Supreme Administrative Court and of the Constitutional Court related to exactly these issues.

The first question with taxation of athletes was whether professional athletes can be considered employees or whether they are self-employed persons. Judgements of the Supreme Administrative Court stated that income from activities of professional athletes cannot automatically be classified as income from employment and thus relationships on the basis of commercial contract are not impossible. The nature of these activities itself is not exactly compliable with some provisions in the Labour Code. However, it is up to the two contracting parties (the athlete and the club) to agree on creating a relationship on the basis of employment contract or a commercial contract.

In practice, we can most often see that athletes conduct themselves as self-employed persons and tax their income as according to §7 – Income from self-employment as according to Act on Income tax; their income is then classified as income from liberal profession (similarly to artists etc.).

Another question not so easy to answer in the field of taxation of professional athletes are numerous payments in kind which athletes regularly receive from their clubs. These are for example: clothes and jerseys, accommodation, transport, rehabilitation etc. From the point of view of taxation we need to assess whether these payments in kind are non-monetary income for the athlete or not and thus taxable or not.

Unfortunately, current judicature does not provide a clear answer to this question, however, the Coordination Committee of 2012 and then of 2015 clearly stated that these non-monetary payments in kind are taxable income of the athlete.

We would also like to mention taxation of foreign professional athletes who are temporarily employed in a club in the Czech Republic. It is not uncommon for a foreign athlete to come play his or her sport in the Czech Republic for a Czech club. So how should their income be taxed?

There is an individual article among international contracts concerning taxation of internationally employed athletes about the prevention of double taxation. In the OECD model contract it is namely article 17, with some contracts signed in the Czech Republic it is article 16. This article of international contracts clearly states that income of athletes employed abroad shall be taxed in the area where the athlete plays his or her sport. Thus, if, for example, a Slovak player and therefore a tax resident in Slovakia plays for a Czech club and has a signed contract with said club, all income connected to this activity will be taxed only in the Czech Republic.

In accordance with Act on Income Tax a withholding tax of 15% is imposed on income of foreign athletes. This rate is applicable for tax residents of other EU member states and of states that are members of EEA, or for residents of third countries with witch the Czech Republic has signed an international contract in order to avoid double taxation and the contract is in force; or an international agreement about exchange of information in the tax field. In all other cases, a withholding tax of 35% is imposed. This tax shall be deduced by the tax administration upon salary payout, remittance, or when a payment is credited to the taxpayers account, the deduction should be made the latest on the day when the debt is accounted for.

In this article, we have aimed to shed some light on taxation of athletes and prove that it is not as straightforward and unambiguous as it might seem. If you are met with a problem concerning taxation of professional athletes and you are not sure how to proceed, or you are a professional athlete yourself, don’t hesitate to contact us. We will be happy to help you.

Written by: Lucie Berglová

Edited by: Daniela Císařovská