Real Madrid and Portuguese forward, Cristiano Ronaldo is set to sign a new contract extension that will bring his salary from €10 million per season to €17 million per season, but the Spanish Government looks be the big winner due to increase tax rates on the player’s salary.
According to various sources, Cristiano’s renewal is imminent, but due to the Spanish government’s abolition of the ‘Beckham Law’, that allowed Cristiano to pay just 24.75% income tax, he will no longer be grandfathered into the law and the new deal will force him to pay according to the current tax laws at a rate of 51.9%.
The new laws state that all salaries over €300,000 are taxed at a rate of 52%, depending on the region.
Real Madrid, as they did for Ronaldo’s original contract, will bear the brunt of the tax laws that will see them pay a total of €35.3 million per season for Cristiano’s services; €17 million in clean salary to the player and €18.3 to the Treasury, as the current rate in Madrid is 51.9%.
Spanish news site, Cinco Dias, explains how the Beckham Law came into effect.
Cristiano Ronaldo was one of the last players to benefit from the Beckham Law, created at the end of the last term of José María Aznar, who instituted the law to attract highly qualified professionals. Despite the initial aim of the measure, one of the first to benefit from the tax advantage was David Beckham. At the same time Real Madrid signed Cristiano in June 2009, the debate was once against reopened and the Socialist government of José Luis Rodríguez Zapatero amended the law in 2010, eliminating the possibility of being taxed to 24.75% for those who had an income exceeding € 600,000.The move angered the Professional Football League (LFP), which even threatened lawsuits.
Lionel Messi’s case was different. When he signed a professional contract with FC Barcelona he was a tax resident in the country and could not, therefore, qualify for the Beckham Law. The Catalans club pays the tax the rate of 56% set in Catalonia, the region with the highest income tax lien . In round numbers, he’s paid 36 million euros in total: 20 million and 16 million to the state treasury for the player.
Neymar, the major signing of the season, pending the fate of Tottenham midfielder, Gareth Bale has signed a deal with a seven-million net income with the Blaugrana. Again, the Spanish treasury is the major beneficiary since only the player’s salary nets them 8.9 million, which is paid by the Catalan side.