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  • Crypto: Lionel Messi and PSG’s token gesture

    1 September 2021

    Two of the biggest footballers in the world moved in this transfer window.

    Surprisingly, I am not talking about Everton’s new signing of the mighty Solomon Rondon but, of course, Ronaldo and Messi.

    As someone who lives north of the wall, you might think this article is going to be about Madeira’s finest son re-signing for United.

    But no.

    This is an article about Lionel Messi… and cryptocurrency.

    ‘La Pugla’ (translated to the less flattering ‘flea’) signed a two-year deal with Qatari-owned Paris St Germain (“PSG”) a couple of weeks ago.  It is reported that this will earn him $41 million in an annual salary plus bonuses.

    Not too shabby in itself.

    However, intriguingly, the club also revealed that Messi’s ‘golden hello’ also includes PSG crypto fan tokens, an Ethereum-based Non-Fungible Token (“NFT”).

    The reports suggest that the amount could range around 25-30 million euros.

    If Messi had signed for Man City, as it was rumoured, and they had paid him in Blue Moon tokens (I assert trademark!) then it would almost certainly be the case that this would be subject to tax as employment income.

    Indeed, a modern way of paying a modern player brings back memories of old employment tax cases involving football players – specifically Shilton v Wilmhurst.

    This involved England stopper Peter Shilton, a man who had his share of bad experiences with Argentinian number 10s.

    Shilts’ was signed from Nottingham Forest by Southampton. In this case, perhaps unusually, he received payments from both clubs for agreeing to the transfer. It was held that both payments were taxable under as earnings from his new employment. However, the distinction was drawn between an emolument derived “from being or becoming an employee” and an emolument which is attributable to something else. Where a payment is not for past services or an inducement to become an employee (as in Shilton) then the payment is not received “from employment”

    If we look at this from a UK tax perspective, as with Shilts, Messi’s fan tokens would clearly be received from his employment with PSG and subject to income tax.

    Where the PSG fan tokens can be converted into fiat currency (eg euros, dollars or sterling) either directly or indirectly (eg first need to convert to Ethereum first) then the employer would need to withhold PAYE on the payment.

    Further, under UK rules, he would have to pay capital gains on any increase in value in the tokens on a later disposal.

    Now, Mr Messi did have some differences of opinion with the Spanish tax authorities. So, let’s hope he has taken some advice regarding his pioneering package.

    If you have any queries regarding this article, the taxation of digital assets, or tax matters in general then please get in touch.

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