Athletes from countries across the globe competing in the World Cup may be going home with an unwelcome prize this year: a hefty tax bill from the United States.
Not only may they be hit by U.S. taxes, but by state taxes as well, especially in states like New Jersey that have a state income tax. Coaches, team employees, media professionals and businesses that provide services could also be on the hook for taxes, according to a "
On the other hand, companies may be exempt from corporate income taxes. "When a country goes to host a FIFA World Cup, it often signs a set of guarantees that FIFA requires of the host nation," said Mina Capouet, a senior legal analyst at Wolters Kluwer. "The terms will vary by country, but commonly they offer tax exemptions, such as from corporate income tax."
For the World Cup, the host government typically has to pass legislation to implement tax exemptions, and the exemption usually applies to FIFA, the broadcasters, sponsors and subsidiaries. But while the participating member associations in FIFA secured tax exemptions from Mexico and Canada, which are also hosting the World Cup this summer, the U.S, failed to provide them, despite lobbying by FIFA.
"FIFA itself usually pays little to no corporate income tax on tournament revenues, including their subsidiaries, and payments to FIFA may be exempt also from the withholding tax," said Capouet. "On the other hand, for sponsors and broadcasters, their exemptions are usually limited to accredited commercial activities and specific contracts connected to the tournament."
Players and companies may be facing taxes from both the U.S. and the states hosting the games.
"In the U.S., in particular, you have greater complexity because you have tax at the federal and state level," said Capouet. "States are not offering exemptions from income tax, and they're not granting 501(c) tax exempt status that the federal government is offering."
She noted that all the players are subject to income tax at the state level. However, some states don't have an income tax, like Texas and Florida. Three states — Florida, Georgia and Missouri — have offered tax waivers, collectively foregoing an estimated $57.8 million in revenue to host the World Cup games.
"At the federal level, the teams have a federal exemption," said Capouet. "FIFA has been classified as a tax-exempt organization in the U.S. since the 1994 World Cup games. However, the organization was not able to secure a similar exemption for its nations' members like the teams until now in the U.S. this year. Notably the Treasury made tax concessions allowing FIFA World Cup teams to apply for a 501(c)3 tax exempt status, so they're off the hook for federal tax, but state taxes are still at play."
Tax treaties
Players and organizations whose countries lack a double tax treaty with the U.S. also could be facing the possibility of being taxed twice on their earnings.
"At the individual player level, there is no exemption," said Capouet, adding that players from "other countries are generally subject to a flat 30% federal tax rate. Even if their income is exempt from federal tax through a double tax treaty, some states, like New Jersey, don't recognize treaty exemptions for this, so they will still be subject to state income tax in New Jersey and other states that don't recognize it. At the state level, the tax liability for athletes and staff for individuals depends on the location of the team's matches and the states where they're training when they're not playing their matches."
She noted there's a "jock tax" that some states have imposed on athletes in the states where they compete, and the tax rates all vary by state. For example, teams that are training in California are taxed at a rate of 13.3%, which is calculated by taking the number of duty days spent in California divided by the total number of duty days that they're spending at the entire tournament, multiplied by their total income to figure the portion of income that's subject to the tax.
Many of the athletes and other participants in the World Cup will also face reporting obligations.
"Non-resident alien individuals, including players, are subject to U.S. federal income tax and reporting rules," said Mavanee Anderson, a senior content management specialist at Wolters Kluwer. "In other words, any income earned while they're in the U.S. could potentially be taxed. Compensation for services is generally sourced where the services are performed, including salaries, wages, personal services, business income. … It can include the U.S. allocable part of match fees, team or federation bonuses, prize-related payments, promotional [appearances], endorsement services, and other event-related or event-specific payments. That's potentially a lot of money."
The IRS, the Canada Revenue Agency, and Mexico's tax agency, Servicio de Administración Tributaria, have reached a consensus about allocating such taxes. But there are exemptions.
"FIFA negotiated several federal tax exemptions, but they're specifically for national teams' earnings, and they don't apply at the player level, so players are still responsible," said Anderson.
Some players' accountants made prior arrangements with the IRS by submitting a Central Withholding Agreement, but the CWA needed to be submitted 45 days ahead of time.
As the Taxpayer Advocate Service noted, for individuals who aren't employees, such as independent contractors or performers, U.S.-source compensation is generally reportable on IRS Form 1042-S and is subject to a 30% federal withholding tax on the gross amount, unless a lower treaty rate, statutory exemption or CWA applies. "This means the withholding may be applied before expenses are deducted," according to TAS. "The organization making the payment – such as a team, league, promoter or event organizer – is typically responsible for collecting proper documentation, withholding tax from the payment, and remitting the tax to the IRS."
Athletes may benefit from the 90-day, $3,000 de minimis rule for nonresident aliens under the
"There's also a narrow statutory exception for compensation paid by a foreign employer for U.S. services by a nonresident alien," said Anderson. "It can be exempt if the services are for a qualifying foreign employer or for an office. The person has to be present in the U.S. for no more than 90 days, and the pay is not more than $3,000."
However, tax authorities want to make sure they can collect taxes from well-heeled players, performers and sportscasters who visit from abroad.
"They want to make sure that these highly paid athletes and performance artists are paying their tax, so almost all U.S. tax treaties include a separate article that's applicable to foreign artists and athletes that excludes them from the threshold-related exemptions, and typically those exemptions would be something like around $3,000 earned and 90 to 183 days worked that might otherwise apply," said Anderson.
Celebrity footballers
She tried to calculate the hypothetical tax exposure of several of the most famous World Cup players with the AI help of Microsoft Copilot.
"Depending on what tax treaty their resident country has with the U.S., it can make a huge difference in the amount of tax that they end up owing," said Anderson. "For example, Harry Kane came out pretty well, because he's from the England team. The way the U.S.-U.K. income tax treaty is set up is very beneficial for artists and athletes. It's very efficiently laid out, and Harry Kane ended up with one of the most favorable outcomes, all other things being equal. The treaty is really effective at preventing double taxation, almost entirely. Foreign credit relief is one of the best and key advantages from that tax treaty. U.K. players often split salary and image rights into separate earning components, so the treaty accommodates that really well."
Another star player, Erling Haaland from Norway, also did relatively well, according to her calculations, thanks to the
Another international player, Lionel Messi of Argentina, already earns much of his money in the U.S., but the tax outcome is unclear due to the lack of a tax treaty with his home country. "Perhaps he's not a good example, because he plays for Inter Miami, and my model didn't take into account all of his other potential U.S. income," said Anderson. "But the point with this model is that there's no tax treaty between the U.S. and Argentina, so any potential offsets would have to do with whether or not Argentina decides to accept credits against the Argentine tax for U.S. tax paid."
Similarly there's no tax treaty with Brazil, which could drive up the taxes of Brazilian player Vinicius Junior. "He ended up doing the worst as far as tax goes," said Anderson. "He owed the most. He might end up paying double tax on the income he earns."
For purposes of determining which double tax treaty applies, the IRS would look at the country of tax residency as the determinative factor. "You can have an Argentinian player that is a resident in Spain," said Capouet. "It would look at the treaty between Spain and the U.S., and not Spain and Argentina, if their tax residency is in Spain, even though it's an Argentinian player."
Messi probably chose to play for Inter Miami because of the lack of an income tax in Florida.
State challenges and economic benefits
While the federal government may have the power to collect taxes from foreign taxpayers, individual states may face difficulties collecting money from many players and officials.
"There are enforcement challenges, especially for state departments of revenue," said Capouet. "Allowing participating national football associations to seek tax exempt status has raised concerns among host states regarding potential revenue losses. For example, in New Jersey, tax officials have identified possible refund obligations for admissions, hotel occupancy and sales taxes, as well as practical challenges enforcing tax liabilities against foreign athletes and teams. Because prize money is most likely paid after the participants have left the U.S., collecting a tax can be quite difficult. New Jersey officials have considered, but they rejected as impractical, the use of jeopardy assessments to secure payment before the prize money was distributed because they would basically be walking on the pitch and then taking their share before the teams were paid, and that would be really impractical. Instead, New Jersey has really focused on outreach and education, reaching out to the individual teams about their tax obligations in New Jersey."
While New Jersey and its neighbor, New York, may have trouble collecting taxes from the players who are visiting, they're bound to collect money from the foreign tourists and fans who are boosting the local economy during the tournament. In the weeks leading up to the matches, there were complaints about the increased prices of New Jersey Transit tickets to games at the Meadowlands, forcing NJ Transit to ease the fare hikes.
"Unfortunately, there's no formal cost-benefit test that can pluck these numbers and spew out whether it's worth it to host the World Cup," said Capouet. "But what's unique to the U.S. is that it's really segmented across the different levels of government with their own cost-benefit evaluation. For this World Cup we have 48 national teams competing. The U.S. is hosting 78 matches in 11 cities across 11 states. The event is expected to generate $11 billion in revenue. FIFA approved a record $727 million in distribution for prize money, which is a 50% increase over the 2022 World Cup, so economically this is the biggest World Cup that's ever taken place. Where there's a lot of revenue, there's taxation."
No matter who collects the taxes and train fares, the international football federation is sure to benefit. "The winner here is FIFA, because they're taking home all the ticket sales revenue," said Capouet. "It's not the federal government. But I think that the federal government is less concerned with whether the tax exemptions will even out in a fiscal sense than whether broader economic activity would generate more value than the revenue that's been foregone. The World Cup is bringing millions of visitors to the United States. Most of the spending occurred in hotels and restaurants, transportation, which is why the prices of buses and ticket sales have gone up. Entertainment, retail — that's where the revenue is going to be generated."
One advantage for the U.S. is there are already many stadiums being used for a different form of football. "We're not seeding new capital into building stadiums like other countries have done, so compared with past World Cups, I think that the cost is way less than it's been elsewhere," said Capouet. "Of course, the U.S. really wants that international prestige of hosting the World Cup games. At the state and local government level, the analysis gets more specific because they're bearing most of the direct costs, like making improvements to the stadiums, transportation, policing, and I imagine they have to do economic impact studies before committing funds to estimate hotel occupancy numbers, restaurant sales, sales tax collections and visitor spending. Each state is doing their own comparative analysis to figure out what the projected benefits are against public spending, and then the tax concessions that they're making on ticket sales for those states that have done so."
