Suspension FFAR: 'To double rep or not to double rep, that’s the question'
Friday, 5 January 2023
After the RBFA’s earlier decision to consider the caps in the NFAR purely as a recommendation (20/12/2023), it followed FIFA's decision to suspend the bulk of the FFAR worldwide pending a decision by the European Court of Justice (30/12/2023). Yesterday, the RBFA has decided to follow FIFA's recommendation to suspend the same provisions in the national regulations for national transactions with immediate effect (4/1/2024).
With the exception of the new licence obligations and the regulations on minors, most of the provisions (the caps, the prohibition of double representation, the restrictions on which party may make the payment, etc.) have been suspended until further notice.
Thanks to this suspension, (at least) during this winter transfer window, a broad contractual freedom will again apply. The latter is accompanied by a number of important legal and tax implications, depending on the factual context:
- Dual representation can still be problematic from a legal perspective. Both internationally and nationally, various legal sources provide that an intermediary may not have a conflict of interest. Therefore, in principle, it is still impossible to represent two parties with conflicting (financial) interests on the same transaction. In the framework of an incoming transfer, the interests of the player and the engaging club run parallel, namely paying the lowest possible transfer fee to the selling club (cf. 'one budget' principle as defined in CAS 2023/O/9370, PROFAA v. FIFA, 24 July 2023, p. 21 and p. 63: a lower transfer fee ultimately allows more budget as wages for the player). But, for instance, when recruiting a 'free agent' and thus merely negotiating an employment contract this is more difficult to defend.
- The need will be greater than ever to determine (and: be able to demonstrate) on whose behalf the agent is acting. Contractually, more scenarios are conceivable than before: a club agent, a player agent, or both. New is that in the latter case, in case of dual rep, a specific split percentage will have to be determined. With the suspension of the FFAR (and the corresponding provisions in the association regulations for national transactions), no further restrictions apply in this respect. The provision that the agent must act at least 50% on behalf of the player is suspended until further notice.
- Following the Special Tax Inspectorate (STI)’s club tax investigations and the announcement in Minister Van Peteghem's most recent policy note, it is expected that rigorous tax audits will continue to be carried out as to the proper tax treatment of agency fees. The portion of the total commission on a dual representation that is attributable to 'player services' must be borne by the player or charged as a taxable benefit in kind. In the case of a dual rep, it will in addition be necessary to be able to substantiate the applied split percentage. An unrealistic proportion of the commission being allocated to club services will raise questions. It is advisable to keep a number of records already during the negotiations of the communication with the agent in order to be able to substantiate the applied split if necessary.
- If it is agreed in the negotiations that the club will bear the economic cost of the commission, the difference in cost of club services vs player services should be kept in mind. Depending on the party for whom the agent is acting, there are significant tax/financial differences (e.g. the corporate income tax deduction limitation, the applicability of the wage withholding tax exemption, etc.). By way of illustration, a 10% commission for an amount of 100 KEUR (121 KEUR incl. VAT) for player services, costs the club (grossed up) 90,295.13 EUR (with the player being fully reimbursed for tax and social security cost). The economic cost of the same 100 KEUR commission (121 KEUR incl. VAT) for club services is 117,500.00 EUR.
Within Atfield, we can assist where necessary to provide guidelines on the apportionment percentage, to provide the relevant calculations (club costs/eventual net guarantees/upfront fees) in ongoing negotiations or to assist with tax, accounting and payroll processing.
Always available for any questions on this matter!