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Tax Relief for Sportspersons on Retirement

Published on 02/10/19

When a sportsperson retires they may be entitled to a tax refund. The refund is calculated by granting a 40% tax deduction against qualifying income for any 10 of the previous 15 years. For example, a sportsperson who earned €100,000 per annum in each of the previous 15 years could be entitled to a tax refund of €160,000 (€100,000 x 40% x 40% x 10) on retirement. 

What sportspersons are entitled to the relief?

The following sportspersons may qualify for the relief:

• Athletes
• Badminton players
• Boxers
• Cricketers
• Footballers
• Golfers
• Jockeys
• Motor racing drivers
• Rugby players
• Squash players
• Swimmers
• Tennis players

How is the refund calculated?

The sportsperson’s income tax liability for 10 years is recalculated assuming the sportsperson’s gross income from carrying on the sporting employment or profession are reduced by 40%.  The sportsperson can select any 10 years from a 15 year period made up of the year of retirement and the 14 previous tax years. The 10 years selected do not have to be consecutive tax years. 

The income which is reduced by 40% includes:

• Where the individual was an employee:
All salaries, fees, bonuses and other benefits paid to the individual by their employer as a direct consequence of the participation by the individual in the relevant sport (i.e. any type of fees or benefits received from actually playing the sport in question).

• Where the individual was self-employed:
All match or performance fees, prize moneys and appearance moneys paid by anyone as a direct consequence of the participation by the individual in the relevant sport (i.e. any type of fees or benefits received from actually playing the sport in question).

The 40% reduction applies to gross income before expenses are deducted. The 40% reduction does not apply to the following income:

• Sponsorship moneys
• Receipts for participating in advertising or promotional material
• Receipts for video, tv or radio programmes
• Receipts for personal appearances or interviews
• Receipts for newspaper or magazine articles
• Receipts for the use of the individual’s image or name to promote or endorse products or services.

The 40% reduction does not impact on the individual’s USC or PRSI liability i.e. no refund of USC or PRSI may be made for the relevant 10 years.

A sportsperson is entitled to claim a tax deduction for pension contributions of up to 30% of their sporting income. This tax deduction is calculated without taking into account the 40% reduction and the tax relief for pension contributions is not reduced where a claim for sportsperson relief is made.

An example of the calculation of the relief is set out below.

Does the sportsperson have to satisfy any other conditions?

• The sportsperson must have permanently retired from participation in the sporting occupation/profession.
• From 1 January 2014 a sportsperson must be resident in an EU, EEA (EU plus Iceland, Liechtenstein and Norway) or EFTA (EEA plus Switzerland) in the year of retirement (the Brexit Omnibus Bill provides that post Brexit sportspersons resident in the UK will qualify). Prior to 2014, the requirement was that the sportsperson must be resident in Ireland.
• The claim for the relief must be made within 4 years of the end of the year in which the sportsperson retires.
• The individual must be tax compliant.

The relief can be withdrawn if the individual subsequently recommences to carry on the sporting employment/profession.

Sample calculation of sportspersons relief

Jack, a professional rugby player, permanently retired from rugby in 2019.  Jack is entitled to claim sportspersons relief.  He can select any 10 years from the years 2005-2019 on which to base a claim for sportspersons relief.  Assuming 2017 is one of the years he selected he would be entitled to the following refund for 2017:

Income tax liability before sportspersons relief 

 
Rugby salary  200,000
Employment expenses   (5,000)
Net income from employment 195,000
TV and radio participation fees 5,000
Personal appearance fees 10,000
Taxable Income 210,000
Income tax liability:  
€33,800 @ 20% =  6,760
€176,200 @ 40% =  70,480
Less tax credits (3,300)
Income tax liability 73,940

 

Income tax liability after sportspersons relief

 
Rugby salary 200,000
Sportspersons relief (40% of €200,000) (80,000)
Employment expenses (5,000)
Net income from employment 115,000
TV and radio participation fees 5,000
Personal appearance fees 10,000
Taxable Income 130,000
Income tax liability:  
€33,800 @ 20% = 6,760
€96,200 @ 40% = 38,480
Less tax credits (3,300)
Income tax liability 41,940
   
Refund Due (A - B) (i.e. 40% x 40% x €200,000) 32,000

 

The same calculation will be carried out for all 10 years which Jack selects from the years 2005-2019 to give the total refund due.

If we assume Jack retires while playing professional rugby in France, he would still be entitled to claim sportsperson relief in respect of his years spent playing professional rugby in Ireland.

The above is intended as a general guide.  No action should be taken on the basis of the above without obtaining professional taxation advice.

If you have any queries please do not hesitate to contact Purcell McQuillan Tax Partners Ltd on 01 668 2700.


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