Just hours before taking the field against Spain in the World Cup, it was discovered that Team Portugal star Cristiano Ronaldo made a deal with Spanish tax authorities to pay a $21.8 million fine in a tax evasion case. He also agreed to two years of prison, but the term was suspended by the judge. It is unlikely that he would serve prison time because Spanish law states that a sentence of less than two years for a first offense can be served with probation.
The Spanish Tax Agency has not officially accepted the deal, and some sources report that the agency could demand more than $34 million from the Real Madrid soccer star. Other sources have noted that the if the two sides do not come to an official agreement soon, the tax agency could demand the much larger amount.
Reuters reports that the Portuguese star, 33, was accused of not paying $16.5 million in taxes that related to his image rights from 2011 to 2014. His agent was not available to comment about the report as of today. The Spanish tax agency has also not commented on the high profile case.
Last July, Ronaldo rejected that he had done anything wrong, as he made clear in a 90 minute hearing in front of a Spanish judge. Prosecutors at the tax agency state that several companies in Ireland and the British Virgin Islands were used by the soccer star to avoid paying the taxes he owed. It is estimated that Ronaldo earns up to $93 million per year, with about half of his income coming from image rights deals with his many corporate sponsors.
Ronaldo is not the only top soccer player in Spain that is the target of a tax evasion crackdown in Spain. Barcelona and Argentina star Lionel Messi was given a 21 month prison sentence on a similar charge in 2017. He was able to get out of serving time by paying a fine. The court found that Messi was funneling his income from his image rights through Belize, Switzerland and Uruguay. He was able to avoid paying more than 4 million Euros in taxes between 2007 and 2009. He had to pay 5.1 million Euros in back taxes in 2013, and he was fined 1.7 and 1.4 million Euros in fines after the guilty verdict.
Between 2005 and 2010, foreign players based in Spain were protected by the Beckham law that allowed them to reduce their tax liability. But this exemption was lifted during the financial crisis that gripped Spain in recent years.
Interesting that Ronaldo and Messi Are Neck and Neck in Tax Evasion
Ronaldo and Messi have been neck and neck for years on the soccer field, with each regarded as one of the best if not the best soccer player in the world. Depending upon who you ask, some say Messi is best, while others say Ronaldo. Generally, Messi and Barcelona have been outplaying Ronaldo’s team Real Madrid. But it is clear that Messi has had a wide lead until now in tax evasion, after he was convicted of hiding his income as mentioned earlier in this article, in 2007 to 2009.
It took almost two years for Ronaldo to catch Messi in this regard, but from today’s news, it seems that he has done it.
Spain and Income Tax Evasion – A Way Of Life?
Some experts say that for decades, tax evasion in Spain was not just a way of life but was almost encouraged. Not these days. In the last 10 years, Spanish taxes have gone up a lot, especially the income tax. While overall taxation in Spain is still low compared to the rest of the EU, the tax rates have been rising for years, as have the number of tax evasion prosecutions.
Foreigners who have income or assets in Spain should get expert financial advice about paying taxes here. This ensure that you will take advantage in the best possible way of your tax situation nad also make sure that you do not get charged with tax evasion.
The tax system in Spain is complex, and even experts there have a hard time agreeing with the tax agency on many parts of the law. Taxes are levied by three levels of government: central, regional and local. Government taxes are handled by the Ministry of Economy and Taxation. Its headquarters are in Madria. Assessment and tax collection is handled in provincial capital towns.
There is a five year statute of limitations on back taxes collection in Spain, so if no action is taken during this period, the money cannot be collected.