What Do Lionel Messi, Cristiano Ronaldo and Floyd Mayweather have in common aside from being top atheletes in their respective sports, and extreme wealth?
Ronaldo and Messi with the Spanish Tax Authroity, and Mayweather with the IRS, which just goes to show you that no matter how much money you have, or don’t have, you still have to report income, file on time and pay your taxes!
In Ronaldo’s case, the Spanish Hacienda tax authority believes Ronaldo failed to pay €14.7 million in taxes pertaining to income earned on his “image rights” between 2011 and 2014. The belief is that he used (and still uses) a shell company in the British Virgin Islands and Ireland, to hide at least €78m in image rights.
Ronaldo’s camp claim that he has fulfilled all his tax obligations, maintaining that the majority of his image-rights income is earned abroad and therefore not liable for Spanish tax.
How does Ronaldo’s situation differ from Lionel Messi’s tax case?
Barcelona star Lionel Messi and his father Jorge were found guilty of tax fraud in July 2016 after it was found they had hidden image-rights income from the Spanish authorities. Messi was fined €3.6m and sentenced to 21 months in prison (which was suspended) for defrauding €4.1m between 2007-09.
The Messi family had previously paid over at least €10m in back taxes and charges, long before their case made it to court.
In Messi’s case, the court determined there was a total failure to fill his tax obligations on image rights income.
A huge concern stemming from the The Supreme Court’s judgement in the Messi surrounded the role that Messi’s tax and financial advisors played and how both parties were not indicted as part of the prosecution since they there was evidence that they advised the player on how to evade taxes.
In Spain, a guilty verdict for an aggravated tax crime means a mandatory jail time of two to six years, while conviction of the lesser offence brings a suspended sentence. If Ronaldo admits to the details in front of the judge within two months after being accused, and pays over the amounts allegedly defrauded, his punishment could be reduced.
Messi’s 21-month prison sentence for tax fraud was reduced to a €252,000 fine, while his father’s 15-month prison sentence was reduced to a €180,000 fine.
These fines are in addition to the re-payment of the taxes originally owing plus any penalties and interest accrued to the balance.
Floyd Mayweather, and his estimated net worth of $340 million is in trouble with the IRS and has apparently filed a petition asking for a temporary reprieve from unpaid taxes from 2015 until after his fight with Conor McGregor in August.
Apparently, while he has substantial assets, those assets are restricted and primarily illiquid. The upcoming fight against McGregor, however, would provide Mayweather with enough liquid cash to pay the IRS debt from 2015 in full.
Mayweather, made $220 million alone from his 2015 fight against Manny Pacquiao. It is unclear how much he owes the IRS in taxes. Given a 15-month lapse since the 2015 tax due date, Mayweather would owe 7.5% in penalties plus accruing interest on top of what he was already scheduled to pay.
Forbes estimated Mayweather’s net worth at $340 million in January.
So the moral of the story is this;
Not everyone wants to pay their taxes, and some will go to great lengths to reduce or avoid paying taxes. If that is something that you feel you must do, you have to be prepared for the consequences of your actions when and if the government comes back to you.
File on time.
Pay on time.
Don’t pay the government more than you should.
If you need help because you’re carrying a balance with the CRA and you want to discuss options, contact Goldhar Tax Solutions today!
Toll free 1.877.TAX.AID1, or 1.877.829.2431.