REAL MADRID

Real Madrid's key to open door for Ronaldo's return

Real Madrid could take advantage of a tax mechanism that would allow the club to match Ronaldo's Juventus salary, while also giving the player some major tax incentives.

Real Madrid's route to open way for Ronaldo's return
JENNIFER LORENZINI REUTERS

Considering Cristiano Ronaldo’s strained history with Spain’s tax authorities, one of the biggest deterrents for the footballer to return to Madrid could be tax-related.

In January 2019, the Portuguese star, who had already left Madrid for Juventus, was fined €18.8 million ($21.6 million) over unpaid tax on income he made outside his Real Madrid salary, including from image rights and sponsorship endorsements.

When Cristiano signed for Juventus in the summer of 2018, both the player and the club benefited from Italy’s generous tax incentives, which represent both an advantage for Serie A clubs and a major draw for footballers to the country.

While there will be many factors that will determine Ronaldo’s final decision on whether to leave Juventus and return to Madrid, one consideration will undoubtedly be related to earnings. And for Madrid, of course, the cost of the operation will also be a determining factor on whether or not it decides to go though with it.

Juventus' Cristiano Ronaldo in action.

Real Madrid and Ronaldo could both benefit from one-year deal

But there is a way that Madrid could re-sign the Juventus forward which would both allow the club to take on the large cost of the operation, while also being beneficial for the player from a tax-perspective.

"If Madrid gives Cristiano a one-year contract, the Portuguese could be considered a non-resident in Spain, as he could spend less than 183 days of the calendar year here. Being a non-resident, he can avoid paying tax on 50% of his salary in Madrid as well as other income that he obtains around the world from sponsorships and endorsements,” lawyer Toni Roca, an expert in sports law and CEO of the Sports Law Institute, explained to AS.

“As a non-resident, he would only pay 19% on his salary at Madrid. For the club the advantage is that it would have to pay less to pay the player whatever he negotiates in net salary. And the footballer would not pay anything for image rights abroad.”

Under this tax structure, Madrid would be able to match the player's €31 million net salary at Juventus, meaning the club would pay around €40 million gross, which is more-or-less the figure it was paying him during his last contract, when he was coming out with €20 million net. Furthermore, as a non-resident, the 36-year-old would not have to pay tax on earnings of €40 million he receives from image right contracts around the world.

Two-year contract more burdensome for Real Madrid and Ronaldo

A two-year contract would be significantly more burdensome for both the club and player. As Roca explains, in that case, "in 2022 the player would become a resident, Madrid would have a cost equal to double the player's net salary, and Cristiano would have to pay €20 million euros on image rights earnings.”

As part of Italy’s favorable tax regime, players only have to pay a flat fee of €200,000 on income from abroad, such as earnings from image rights. "The Spanish league is the one with the worst tax regime, it does not receive any special treatment to attract sporting talent to our country," argues Roca, echoing complaints that LaLiga president Javier Tebas has made on several occasions.