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V3549-16 29 July 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · indemnización

Severance payments for football player contract terminations are not subject to VAT

A football club has requested clarification on whether the payment of a player's termination clause is subject to VAT. The DGT has determined that these amounts constitute compensation rather than consideration for services, and therefore are not taxable.

The question raised

What would be the taxation of the payment by the applicant of the so-called termination clause for Value Added Tax purposes.

The DGT's ruling

The services of a football player to the club are not subject to VAT due to the existence of an employment relationship pursuant to Royal Decree 1006/1985. The amounts received for contract termination are indemnities which, by their nature, do not constitute consideration for services. Therefore, the payment of the indemnity does not result in a transaction subject to tax, whether assumed by the player or by a third party.

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