In this Olympic and Paralympic year, sport is in the spotlight, especially in France where more than 10,000 international athletes are expected.
At the same time, all eyes are on possible tax changes in the next coming months following the latest snap elections that took place further to the dissolution of the French Parliament by President Macron.
The tax treatment of international athletes is a significant factor in where they choose to compete or establish their careers. Athletes are often required to work in multiple countries during sports competitions, and in some instances they even sign with foreign clubs, and therefore have interests in a range of jurisdictions.
This introduces additional layers of tax complexity. In practice, countries tend to use internal legislation to seek a balance between attractive rules and abuse prevention, but that’s not to say that the regime provided by one country is always as attractive as another. Regimes can vary substantially.
With the Olympics taking place in Paris, it should be noted that France is a rather attractive jurisdiction for athletes. The country does a lot through its tax regime to cater for them.
France does not provide any specific regime for self-employed sportspeople but it does, through the impatriate tax regime and under specific conditions, allow sportspeople moving to France and hired there by a French company such as a football club to benefit from French personal income tax exemptions lasting for nine tax periods.
Indeed, the French tax code provides a number of key tax exemptions benefiting athletes. For example, it includes exemptions under specific conditions on the impatriate bonus as indicated above, expatriate bonus (income for days worked abroad), and 50 per cent of certain types of non-French passive investment income which notably includes dividends from foreign management companies and income from intellectual or industrial property.
Furthermore, France has introduced a smoothing mechanism of income and expenses, which consists, under certain conditions, of reducing the progressivity of French personal income tax on significant gains over a period of three or five years. This mechanism may be helpful for athletes receiving awards but must be applied carefully.
Finally, impatriated athletes may benefit from a tax treatment similar to that applicable to non-residents for French wealth tax purposes until their fifth year in the country.
What effect do all of these benefits and exemptions have? In short, they make France a very competitive jurisdiction when it comes to taxation.
Even though this regime was not initially put in place specifically for sportspeople, it is a real lever for attracting top-level athletes to France, and goes a long way towards making France an attractive place for them to set up shop and compete.
Will France remain an attractive jurisdiction for professional sportspeople? As a major European centre, and an important destination for competitive sports, it is hard to envision a future where professional athletes do not want to travel to France to play, train or compete.
But looking ahead, it is worth noting that several tax topics were recently discussed by the coalition of the French left which won the most seats in the French parliament. Among these were the cancellation of a 30 per cent flat tax on investment income, modifications to the French personal income tax scale, and the expansion of the French wealth tax to include financial assets.
These measures, if adopted, will significantly impact France’s attractiveness within the highly competitive sports ecosystem. Anybody involved in the sporting world who competes or trains internationally should most certainly keep a close eye on how that picture develops.
Anne Marie Boissonnas, Partner, and Sarah Bergougnoux, Counsel, both in the Paris office of law firm Charles Russell Speechlys.