More than half of World Cup nations face extra costs as Fifa fails to agree US tax deal

More than half of the countries eligible for the World Cup are facing additional costs and possible losses due to Fifa’s failure to agree with the United States government about not paying too much tax and the huge differences in the host country’s international tax treaties.

As a non-profit organization, Fifa has had tax-exempt status in the United States since the 1994 World Cup, but that exemption does not apply to all 48 qualifiers, whose national associations must pay more state, federal and city taxes on their earnings from the tournament this summer.

The Guardian has learned that the tax burden will fall disproportionately on many small national corporations, whose governments do not have a tax treaty with the US.

Of the 48 who qualify for the World Cup, 18 are countries that have signed a double taxation agreement (DTA) with the US, which exempts their delegates from paying state taxes, most of whom come from Europe. Apart from the Commonwealth of Nations, Canada and Mexico, the only non-European countries that have signed DTAs are Australia, Egypt, Morocco and South Africa.

As a result many of the smallest countries in the World Cup such as tournament winners Curaçao and Cape Verde will have a larger tax liability than England and France, whose governments have signed DTAs.

This exemption does not apply to players’ salaries, as under federal law athletes and artists are required to pay taxes when they play in the US, but it covers workers and coaches, who at the international level receive very high payments from their organizations in any case.

The Guardian reported in February that many European clubs were afraid of losing money at the World Cup because of the high costs, and the tax issue means that teams from other regions have even bigger worries.

Despite the wide variation in tax credits, Fifa’s operating budget for each of the 48 clubs is set at $1.5m. As a result of the expansion of the World Cup to 48 teams, the daily living expenses for each member of the delegation have been reduced from $850 in 2022 to $600, despite the high cost of travel and hotels in the US. The government of Qatar has also granted tax exemptions to all 32 national associations and clubs in the tournament.

“Groups from advanced, developed countries that have a tax treaty with the US, such as England and Spain, will have much lower costs than small countries such as Curaçao and Haiti,” said Oriana Morrison, a tax consultant who advises organizations in Portugal and Brazil, the latter of which will not benefit from the DTA.

As a result, Carlo Ancelotti, the head coach of the Brazilian national team, will have to pay tax on his salary in Brazil and the US, while Thomas Tuchel, the manager of England, will be taxed only in the UK.

In fact, the Brazilian football association may have to pay for Ancelotti’s additional income tax, but the issue of double taxation will cause great problems for small organizations. The US corporate income tax rate is 21%, while for high-income taxpayers such as international soccer players and coaches the income tax rate is 37%.

“Many smaller clubs, where this type of atmosphere could have made a huge difference in the football industry, will be penalized with huge US tax bills,” Morrison said. “It’s money that could have improved their football industry in your area, but it’s going to stay in the US.

“There is a big difference. It will cost a lot of non-European countries a lot of money to go to the World Cup.”

To make matters even more difficult Canada and Mexico have given all associations a tax exemption, so clubs with club sports in those countries will have lower taxes.

In addition, state tax rates vary greatly. There is no state tax at all in Florida, where seven games will be held in Miami, while it is 10.75% in New Jersey, where MetLife Stadium will host the final game, and 13.3% in California, where Los Angeles and San Francisco will host games.

Fifa declined to comment, but sources at the world governing body said it was working with all national associations to provide help and assistance in tax matters.