Friday 18 January 2019

Sponsorships of athletes.

Athletes must know their obligations when accepting sponsorships.
To further elaborate on my article written on 11 January 2019, "Professional esports athletes must register for tax" it is important to explore the various incomes that a professional esports athlete may have.Sponsorships may be offered to players as equipment, clothing, watches, transport, travel, and monies.

Whether or not the receipt is of a capital nature, such amounts, whether of a voluntary nature or not, must be specifically included in gross income.

However, it should be noted that there is generally not an employer-employee relationship between the provider of the sponsorship and the player. Where no such relationship exists, and the player is not deemed to be an employee for employees' tax purposes, the sponsor will not be required to withhold employees' tax. However, the player is still required to disclose the amount of the sponsorship (in cash or otherwise) in his or her annual tax return. 

However, if the sponsor has sponsored the club or employer of the athlete and the club in turn provides its athletes with a portion of the receipts, the amounts will constitute remuneration and will be taxable in the hands of the athlete. In such a case, the club or employer is required to deduct or withhold employees' tax from the amounts paid to such athletes.

It should be stressed that it does not matter as to whether such sponsorship is in cash or not. For example, if a computer company sponsors a MGO in cash and computers, and such MGO distributes the computers to its athletes, then each athlete will have to have tax withheld on the market value of the computer as well as include the market value of the computer as gross income on his or her income tax return.  

Where an individual athlete is the recipient of the sponsorship, there may too beVAT implications should the athlete be a vendor. In cases where the individual is not a vendor, there will be no output tax by the recipient, and the sponsor will not be entitled to deduct any input tax on the payment.

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