The Belgian tax authorities have recently launched in‑depth reviews of professional athletes performing activities on Belgian territory. As a result, it has become increasingly important for athletes, clubs and organisers to determine which state has taxing rights over sports-related income (i.e., the source state or the residence state of the athlete) and to understand the corresponding tax obligations.
Right to Tax under Article 17
Article 17 of the OECD Model Tax Convention allows the state where a sportsperson performs activities to tax the related income, regardless of whether the income is earned as an employee or as an independent professional. The definition of “sportsperson” is broad and extends beyond traditional athletes, such as runners or swimmers, to include golfers, footballers, tennis players, racing drivers and other professional competitors.
Article 17 applies to income derived directly and indirectly from performances. For example, if a sportsperson receives a fixed salary, the state where the performances take place may tax the portion attributable to activities carried out in its territory. Prizes and awards paid by federations, leagues or organisers for participation in events in a state also fall within the scope of article 17. By contrast, sponsorship, advertising and image-rights payments are governed by article 17 only when they are closely connected to the performance in the source state. Otherwise, other treaty provisions or domestic rules may apply.
The model treaty does not prescribe how taxable income should be calculated; this is determined under the domestic law of the source state. Some jurisdictions impose a fixed rate withholding tax on gross income, while others allow net-basis taxation. Certain states also limit the application of article 17 when a nonresident sportsperson earns only a small amount of income in that state during a tax year.
How Belgium Treats Sportspersons
Belgian domestic law contains specific rules for sportspersons, whether resident or nonresident.
For nonresidents, the first step is to determine whether the sportsperson performed activities in Belgium for fewer than 30 days. If so, the employer or organiser may apply a definitive 18% withholding tax. When this withholding tax is correctly applied and the athlete receives income solely from the sporting activity (with no other Belgium-source income), the nonresident generally is not required to file a Belgian nonresident income tax return.
If the sportsperson performs activities in Belgium for more than 30 days, the tax position becomes more complex. In these cases, the 18% definitive withholding tax does not apply. Instead, the employer must apply the standard payroll withholding taxes (subject to a specific rule for young sportspersons), and the athlete must file a Belgian a nonresident income tax return.
Increased Enforcement by Belgian Authorities
The Belgian tax authorities have become more proactive in enforcing the rules applicable to nonresident sportspersons who spend fewer than 30 days in the country for sporting events. Foreign clubs are increasingly being contacted when the tax authorities discover that a personal income tax return has not been filed or that the 18% definitive withholding tax has not been applied. In such cases, clubs are asked either to remit the 18% definitive withholding tax or to contact each athlete individually to arrange for the filing of a nonresident income tax return.
Given this heightened scrutiny, organisers, employers, clubs and athletes should assess Belgian tax obligations in advance of any event held in Belgium to avoid follow-up inquiries, administrative penalties or potential criminal sanctions. Authorities are also reviewing compliance for games and tournaments held in prior years, and clubs and sportspersons may be required to remediate past noncompliance.
Author: Natasja Walsh
