With 2010 looming, what are the tax implications surrounding soccer teams? If musicians compile a CD, are they taxed and how? Are players in a soccer team, assets, liabilities or investments?
The tax on a professional soccer team will follow the same rules as for other profit-making taxpayers, apart from any special provisions of the Income Tax Act that may apply. A professional soccer team is a business and will be taxed as such. The only sporting bodies that are exempt from tax are social and recreational clubs and amateur sporting bodies.
In all likelihood the soccer team operates in the form of a company or an association of persons, which is taxed in the same way as a company. If the company was formed in South Africa, it is taxed as a resident, which means that it is taxed on world-wide income.
To start with, one must determine whether the amounts you have mentioned must be included in the gross income. Those amounts that are included in the company's gross income will be taxed unless there is a specific tax exemption that applies. Let's consider the following:
Included in gross income of the taxpayer?
Is there a tax exemption?
Money received from sponsors for running professional team
Money received from sponsors for running youth academies
Money received from gate takings
Grants from the league
Yes (assuming they are not repayable)
Therefore, all of these amounts would be taxed in the soccer club's hands.
Musicians, if they have compiled a CD, are they taxed and how?
You would have to establish who gets the proceeds from the sale of these CDs. If the proceeds accrue to the soccer club then those amounts must be added into the club's gross income and the club would be allowed to deduct any costs relating to the CD (apart from capital expenses) and would be taxed on the remaining taxable income. However, it seems likely that the sales proceeds may well accrue to a supporter's club and, if that is a separate entity from the soccer club, then those proceeds would be taxed in the supporter's club. If the supporter's club has registered as a public benefit organisation or a recreational club, then it will not have to pay any tax on the sale of the CDs up to a certain amount. Please let us know if you need more information on this as the tax law on PBO's and recreational clubs has recently changed.
Players, are they assets, liabilities or investments?
The players are assets as they are acquired and held to produce future economic benefits to the club.