Enock Turatsinze
Lawyer and Tax Associate at Godena Associates, Advocates and Tax Consultants with a Keen interest in Tax Practice. Email: et@godena.org
Sport in Uganda continues to grow as investment from the government and individuals increases.
Examples of sports teams in Uganda include Vipers Sports Club, Wakiso Giants FC, and City Oilers Basketball Club, among others.
In the same light, Statista reports that revenue in Uganda’s Sports sector amounts to $50.9M and that is projected to grow at 10.1% up to 2027.
Those mentioned above are all indicators of the sports sector’s potential.
This article is going to highlight the possible tax issues that can be expected under Ugandan tax law regarding Sports and particularly football with a specific focus on the taxation of athletes and clubs.
This will also include obligations imposed on clubs under FUFA Rules.
It should, however, first be noted that there are no particular FUFA rules on tax.
This means that the governing law on taxation of athletes and Football clubs is the general tax law (The Income Tax Act).
- Income by Athletes
Footballers like any other employees in other organizations have employment contracts with respective clubs and should be registered with FUFA.
These employment contracts stipulate earnings that accrue to a footballer such as wages/salary, and bonuses.
Undoubtedly, this is employment income taxable under the Income Tax Act.
This means that the clubs must withhold Employment Income tax on these payments and remit it to URA.
On another note, footballers can exploit their image rights and the contract will always specify what payments are made to the athlete as salary and that for image rights.
It should, however, be noted that sometimes footballers will enter into promotional agreements in which they assign their image rights to image rights companies to exploit them.
In such an instance, these promotional agreements have independent value, and income under such agreements does not amount to employment income (not related to playing activities).
This means that instead they (these rights) would be taxed at the corporation tax rate (30%).
It can be seen that football clubs would enter into schemes with footballers to allocate more of the player’s emoluments to the image rights companies than salary but it should be noted that the Commissioner has the powers to recharacterize such arrangements meant to avoid tax and tax the said incomes accordingly.
- Income by clubs
Football Clubs are first incorporated under the Companies Act before they are licensed by FUFA under the FUFA Club Licensing Regulations.
Like any other entities, they are also required to prepare their financial statements; Statement of Comprehensive Income which reflects the chargeable income of the year & Statement of Financial Position indicating the worth of the Club’s standing at a particular time.
The FUFA Club Licensing Regulations require clubs to submit audited copies of these statements before the commencement of each football season.
Football clubs do earn their incomes from various sources such as Player sales, match day tickets, sponsorship deals (the ones that usually appear on the jerseys & billboards), and sales of club merchandise such as Jerseys, and water bottles among others whose income has to be declared as business income and to be taxed accordingly under the Income Tax Act after deducting any operating expenses incurred in that year by the club.
It can be concluded that even when football is largely a leisure industry, it equally attracts tax obligations that must be fulfilled as highlighted above.
Enock Turatsinze
Lawyer and Tax Associate at Godena Associates, Advocates and Tax Consultants with a Keen interest in Tax Practice. Email: et@godena.org