Plan to relieve Spanish football club tax debts

Clubs in Spain’s top two divisions collectively owe some €750 million to the tax authorities and another €600 million to the social security system. Spanish Secretary of State for Sport, Miguel Cardenal, sparked outrage in Europe when he suggested waiving these unpaid bills. The German tabloid Bild, for instance, ran a headline asking how long the German taxpayer would be obliged to subsidise the wages of Lionel Messi (€2.5 million a month) and Cristiano Ronaldo (over €1 million a month). At a time when Spain’s debt problems continue to escalate and more than five million Spaniards are unemployed and suffering from stringent austerity measures, it would be unacceptable if football clubs were treated more favourably than normal taxpayers. Moreover, giving tax amnesty would constitute State aid, capable of significantly distorting competition, and go against the principles at the core of UEFA’s Financial Fair Play rules.

Faced with public outcry, Cardenal wisely dropped the consideration of forgiving the tax and social security debt – money the clubs owe to the Spaniards. The Spanish government started up discussions with the Liga Nacional de Fútbol Profesional (LNFP; national professional football league) to find a solution. On 25 April 2012, the Ministry of Education, Culture and Sport, the Consejo Superior de Deportes (CSD; superior sport council) and the LNFP reached an agreement, in the form of a protocol, to control and reduce the clubs’ tax debts.

Down the rabbit hole

This is not the first time that the Spanish government has intervened to address the clubs’ failure to pay their taxes. In the last three decades, two main plans have been implemented to resolve the club debt situation. When many Spanish clubs faced high levels of (tax) debt in the beginning of the 1980s, a committee consisting of Presidents of the first division clubs was established to negotiate a deal with the government. These meetings generated a first debtrestructuring plan and led to the creation of the LNFP in 1984. The LNFP committed to set aside 2.5% of the revenue generated from the Spanish football betting pools (la quiniela) as a guarantee to the payment of the outstanding tax debt(1). The plan was a failure. As a result of – amongst other things – poor management by the clubs and a fall in pool collections (as a result of the introduction of competing betting games), the Spanish football clubs fell further and further into debt.

The Spanish Sports Act (Ley del Deporte) of October 1990 paved the way for a second debtrestructuring plan. The Act expressly aimed to ‘establish a model of legal and financial responsibility’ for Spanish football(2). It obliged most professional football clubs, which used to be organised as member-owned clubs, to transform into a joint-stock company with limited liability – Sociedad Anónima Deportiva (SAD)(3). It was expected that by running the clubs as conventional businesses with stakeholders and a board of Directors, financial management and accountability would improve. Only those professional clubs that had shown positive capital balances since the 1985-1986 season could choose not to adopt this new legal status. These clubs (Athletic Club de Bilbao, FC Barcelona, Real Madrid and CA Osasuna) retain their status as member clubs.

Moreover, the CSD and the LNFP agreed to wipe the slate clean. The tax debts of the newly formed SADs were passed over to the LNFP. The equity/shareholder investments raised new capital for the SADs so that all their debt was wiped out. To finance this plan, the LNFP received 1% of revenue from the football pools (this percentage was later increased to 10%). Furthermore, the LNFP and the CSD agreed to increase the share in pools from 2.5% to 7.5%. For the second time, the old solution of large cash injections did not resolve the financial instability of Spanish football. The increase in  transfer fees and player wages an the LNFP’s struggle to control the balance sheets of the SADs – which were based on excessive, intangible assets – led the clubs back to indebtedness above reasonable levels(4).


The new protocol, which the LNFP believes ‘will allow a definitive change in the current landscape under which tax debt will be reduced over time under which it no longer exists’, provides for various financial control mechanisms and sanctions.


Beginning in the 2014-2015 season, clubs will be obliged to set aside 35% of their revenues from the sale of audiovisual rights as a guarantee against tax obligations.

Administrative control

The CSD and LNFP will exercise administrative control over the 20 clubs in the first division and the 22 clubs in the second division. If the clubs fail to follow the guidelines, the CSD can impose sanctions, e.g. disqualify their Managers or withhold payments coming from the National Lotteries. In addition, a joint commission made up of CSD, LNFP and club officials will monitor the fulfilment of tax obligations and impose specific obligations to strengthen financial transparency.

Information provision

The CSD and LNFP will promote all necessary statutory, legislative and regulatory provisions. To participate in official LNFP competitions, clubs will have to provide information on (deferred) debts and need to request postponement of outstanding payments. Failure to comply with these rules will result in a loss of economic rights or a loss of points in the competition. If the clubs avoid their tax obligations using byways or other mechanisms, this will be classified as a serious criminal offence, punishable by expulsion from competition. Most controversially, if a club increases its tax liabilities, potential buyers could submit offers for the acquisition of federative rights of players to the joint commission, who will accept or decline those offers. In the case of disagreement, an individual expert will resolve the matter and take a final decision.

Wanted: debt or alive

Even though the Spanish government denies that the football clubs are getting special treatment, the negotiated deal clearly tries to steer a middle course between heavy-handed tactics and fear of political backlash from sports fans. Firstly, the protocol takes into consideration the troubled state of the Spanish economy. Certainly, football is not immune to the wider economy. Most of club debt dates back to 2008, when Spain slipped into a first recession. In comparison to any other business, however, football is an exceptionally resilient industry. For instance, football clubs can relatively easily adjust to lower income. If they pay lower wages and compete at a lower level, this will cause serious financial distress, but it will rarely jeopardise their existence and supporters tend to be loyal(5). This is unthinkable for most other businesses. Furthermore, if businesses cannot pay their creditors and the value of their assets is less than the value of the liabilities, they are normally liquidated. Most insolvent football clubs, on the contrary, now go into administration(6). Because of the strong geographical roots of clubs and their societal importance, there are few instances where creditors or public administration would be willing to put the survival of the club at risk. Until very recently, going into administration even enabled clubs to continue to play in the first division(7). These are advantages most other businesses do not have.

Secondly, the clubs are given until 2020 to settle their tax and social security debts without the usual requirement to present a detailed restructuring plan for long-term viability (i.e. to demonstrate the capacity to meet all future tax payment obligations). In fact, it remains unclear how the obligation to set aside 35% of revenue from selling broadcasting rights will allow clubs to repay their tax debts. The first division only generates a third of its revenue from broadcasting rights. Since the end of the 1990s, Spanish clubs have individually sold their broadcasting rights (contrary to the other major European leagues). This has favoured polarisation of revenue within the league. There is a wide gap between FC Barcelona and Real Madrid, representing more than 50% of total broadcast revenue, and the other clubs. For the 2010-2011 season, the two Spanish giants both received around €140 million, leaving their domestic peers fighting over the scraps (i.e. the majority of clubs receive around €15 million).

Imposing overly rigid measures that would prevent clubs from generating revenue in the coming years would obviously be dysfunctional. Yet it is difficult to see how the LNFP’s tax deal can be considered ‘business as usual’. The problem is that the leeway given by the Spanish tax authority (in the past) has very much contributed to the problem of overspending by clubs. It is clear that the Spanish football clubs had little incentive to prioritise tax repayment over other outgoings. To give an example: the Scottish club Rangers was forced into administration after running up £9 million in unpaid taxes. In Spain, the enormous tax debt of €155 million proved no barrier to Atlético Madrid to buy top striker Falcao for a club record deal of €40 million in August 2011. Only when a member of Parliament brought up the matter, the public administration released the figure of Atlético Madrid’s and other clubs’ tax debt.


The agreement between the Spanish government and the LNFP is illustrative for the fear that punishing badly run clubs would cause political backlash from fans. This is not to say that the clubs are getting an easy ride: the original idea to waive the tax debt was abandoned; financial control will be strict; and meaningful sanctions can be imposed. Slowly, attitudes are changing. Yet it remains unclear how and when the financial situation of Spanish football will mirror its successes on the pitch.