F.I.F.A. – Dispute Resolution Chamber / Camera di Risoluzione delle Controversie – labour disputes / controversie di lavoro (2020-2021) – fifa.com – atto non ufficiale – Decision 27 January 2021

Decision of the
DRC Judge
passed on 27 January 2021
regarding an employment-related dispute concerning the player Jairo
Morillas Rivero
BY:
Alexandra Gómez Bruinewoud (The Netherlands / Uruguay), DRC Judge
CLAIMANT:
Jairo Morillas Rivero, Spain
Represented by Mr Enrique Romagosa Girones
RESPONDENT:
V Varen Nagasaki, Japan Represented by Mr Takehiro Kaneko and Mr Tomohiro Hayashi
I. FACTS OF THE CASE
1. On 1 July 2018, the Spanish player, Jairo Morillas Rivero, and the Japanese club, V Varen Nagasaki, concluded an employment contract (hereinafter: the contract), valid as from the date of its signature until 30 December 2018, and –then– after a suspension of the contract during the month of January 2019, the contract was again in place as from 1 February 2019 until 30 June 2019.
2. Clause 2 of the contract reads as follows: “Remuneration: (1) Basic Salary: Annual amount: € 300,000 (Net) Monthly amount: € 27,000 (net), 1 months 30,000 €; (2) Signing Fee: € 100,000. Signing fee will be paid after the conclusion of this contract no later than 25th July 2018”.
3. On the same date, the parties concluded a “Memorandum Multi-year Contract”, whose clause 2 provides the following breakdown as to the player’s remuneration during the year 2018:
“Salary and Way of payment.
The club pays the salary to the player with the following condition:
1st year: The First Term: From 1st July 2018 to 30 December 2018
The Second Term: From 1 February 2018 to 30 December 2018
Signature fee: EUR 100,000 (25 July 2018)
Monthly Salary: EUR 27,000 (1 months EUR 30,000)
Annual Salary: EUR 300,000 (NET)
Total: EUR 400,000 (NET)”
4. On 8 May 2019, the parties concluded a termination agreement, whose clause 3 stated the following: “The club will pay the player 2 monthly salaries, corresponding to the months of May and June, in the total amount of EUR 54,000, which will be transferred to the player’s bank account in May. In this context, the contractual relationship between the parties is now terminated. Both parties hereby expressly state that no claims will be made against one another judicially or extra-judicially” (translated from the original text in Spanish; emphasis added).
5. On 26 June 2019, the player –who was resident in Spain during part of the year 2018 and was considered as a tax resident in Spain during the said year– presented his Personal Income Tax declaration (hereinafter: the tax declaration) before the Spanish tax authorities, in compliance with the Spanish tax law.
6. The outcome of the tax declaration was that the player had to pay to the Spanish tax authorities an amount of EUR 77,853.49, as a consequence of his revenues during the fiscal year 2018, in both countries, Spain and Japan.
7. On 4 February 2020, the player put the club in default of payment in the amount of EUR 77,853.49, corresponding to the amount paid by the player to the Spanish tax authorities.
8. On 17 March 2020, the club replied thereto, stating that they are no liable to pay the requested amount, on the basis of 2 facts: that the club was no responsible to pay any taxes out of Japan; and that the termination agreement indicates that the parties had nothing to claim against each other, judiciary or extra judiciary.
9. On 15 September 2020, the Claimant lodged a claim against the Respondent, requesting to be awarded outstanding remuneration in the amount of EUR 77,853.49, corresponding to the amount paid by the player to the Spanish Tax Authorities for his revenues received during the fiscal year 2018.
10. In his claim, the Claimant explained that, during the year 2018, (precisely as from 1 January until 30 June 2018), the player was under contract with the Spanish club RCD Espanyol de Barcelona. In this regard, the player acknowledged that, despite having entered into the contract with the Respondent on 1 July 2018, he was tax resident in Spain during the whole fiscal year 2018.
11. In this context, the player acknowledged having received from the club the net remuneration indicated in clause 2 of the contract.
12. In this regard, the player held that, since clause 2 of the contract states that the amount to be received by the player was EUR 400,000 net, and since the player has had to pay EUR 77,853.49 to the Spanish tax authorities, the club is liable to reimburse that amount to the player, in line with what was agreed between the parties in the contract.
13. Moreover, the player presented an expert report in order to clarify the taxation applied. The said report states that, concerning the remuneration received by the player from RCD Espanyol, i.e. EUR 164,997 gross, the applicable tax rate was 39.28%, in accordance with the applicable Spanish tax progressive rate. Nevertheless, the said report further indicates that, concerning the remuneration received by the player from the Respondent, i.e. EUR 332,998.22, the taxes paid by the club in Japan were equal to a tax rate of 20.42%.
14. The above being clarified, the report concludes that, both revenues combined (the income received by the player in Spain and in Japan) increased the taxable income of the player, which was fully taxable in Spain, insofar the player was considered tax resident in Spain. Hence, the actual tax rate applied by the Spanish tax authorities to the total income received by the player during the fiscal year 2018 is of 44.79%.
15. Therefore, as a result of applying the said percentage to the total income received by the player in 2018, the Spanish tax authorities obliged the player to pay the amount of EUR 77,853.49.
16. In its reply to the claim, the club firstly referred to the wording of clause 3 of the termination agreement and held that, thereby, the player waived his right to file any claim against the club in connection with the contract or claim anything extra-judicially.
17. Moreover, as to the amount requested by the Claimant, the Respondent maintained that the player is not entitled to the requested amount, on the basis of the following reasons:
- “ [The] Memorandum Multi-year Contract" provides, "excluding tax set forth in the tax laws of Japan, next to the total amount, and the Club will bear only the taxes in Japan, and the effect that such amount will not be deducted from the amount provided in the Memorandum is expressly indicated”;
- “If the remuneration amount is stipulated as "NET" in a player agreement, this means that "the Club will bear the withholding tax required by law," and the amount that will actually be paid to the Player will match the amount provided in the agreement. "Withholding tax" as used therein is calculated and determined according to the tax laws of the country in which the payer is located and the tax treaty between the country in which the payer is located and the country in which the payee resides. In this case, since the Club is located in Japan and is paying remuneration to the Player, the Club bears an obligation to withhold the withholding tax calculated and determined in accordance with the tax laws of Japan and the tax treaty between Japan and Spain, where the Player resides”.
- “In this regard, the Club has lawfully paid the withholding tax for 2018 regarding the Player in Japan. Specifically, under the tax laws of Japan, a collection of withholding tax of 20.42% is required with respect to any remuneration paid to a non-resident (an individual other than "an individual who has an 'address' or who currently has a 'residence' continuously for one or more years in Japan") professional football player and corresponds to Japanese withholding income (Article 213(1) of the Income Tax Act of Japan; Article 28(1)” […].
18. In conclusion, regarding the lack of entitlement of the player to receive the claimed amount, the Respondent stressed the following: “the term "NET" is a provision regarding the burden of withholding tax (and not income tax), and considering that the EUR 77,853.49 claimed by the Player is the income tax itself, it is clear that there are no grounds to the Player's claim. Further, the Club has lawfully paid the withholding tax in Japan and does not bear any obligation to pay any withholding tax and/or income tax in Spain, and, therefore, the Club bears no obligation to pay the EUR 77,853.49”.
II. CONSIDERATIONS OF THE DISPUTE RESOLUTION CHAMBER JUDGE
1. First of all, the Dispute Resolution Chamber judge (hereinafter also referred to as DRC judge) analyzed whether she was competent to deal with the case at hand. In this respect, she took note that the present matter was submitted to FIFA on 15 September 2020 and submitted for decision on 27 January 2021. Taking into account the wording of art. 21 of the January 2021 edition of the Rules Governing the Procedures of the Players’ Status Committee and the Dispute Resolution Chamber (hereinafter: the Procedural Rules), the June 2020 edition of the Procedural Rules is applicable to the matter at hand.
2. Subsequently, the DRC judge referred to art. 3 par. 1 and 2 of the Procedural Rules and confirmed that, in accordance with art. 24 par. 1 and 2 in combination with art. 22 lit. b) of the Regulations on the Status and Transfer of Players, the DRC judge is competent to deal with the matter at stake, which concerns an employment–related dispute with an international dimension.
3. In continuation, the DRC judge analysed which regulations should be applicable as to the substance of the matter. In this respect, the DRC judge confirmed that in accordance with art. 26 par. 1 and 2 of the Regulations on the Status and Transfer of Players (October 2020 edition), and considering that the claim was lodged on 15 September 2020, the August 2020 edition of the aforementioned regulations (hereinafter: the Regulations) is applicable to the matter at hand as to the substance.
4. The competence of the DRC judge and the applicable regulations having been established, the DRC judge entered into the substance of the matter. In this respect, the DC judge started by acknowledging all the above-mentioned facts as well as the arguments and the documentation submitted by the parties. However, the DRC judge emphasised that in the following considerations she will refer only to the facts, arguments and documentary evidence, which she considered pertinent for the assessment of the matter at hand.
5. Having said that, the DRC judge acknowledged that the Claimant is requesting to be awarded outstanding remuneration in the amount of EUR 77,853.49, which would correspond to the the amount paid or due by the player to the Spanish Tax Authorities for his revenues received during the fiscal year 2018.
6. After a careful analysis of the documentation brought forward by the Claimant and the Respondent to the present proceedings, the DRC judge firstly stressed that it seems that the Respondent club complied with its contractual obligations when paying to the player the net amounts due to him as per the contract, which where subject of taxation (20.45% tax rate applied on the taxable income of the player, as acknowledged by both parties) in Japan.
7. Nevertheless, -continued the DRC judge- the player argues that, since he was a tax resident in Spain, his total income during the fiscal year 2018 was subject of taxation in Spain. In this regard, the DRC judge duly noted that the player argued that he had to pay to the Spanish tax authorities the amount of EUR 77,853.49 in connection with his income in Japan.
8. In this context, the DRC judge emphasized that all monetary transactions between a club and its players are subject of taxation.
9. As to the tax obligations, the DRC judge pointed out that, having the player acknowledged that he was a tax resident in Spain during the fiscal year 2018, his total income during the said year is, in principle, subject to taxation in Spain.
10. However, -explained the DRC judge- the parties acknowledged that the Respondent paid taxes in connection with the player remuneration (tax rate of 20.45%). Hence, the DRC judge determined that, in order to not pay taxes twice regarding the same remuneration, the Convention between Japan and the Kingdom of Spain for the elimination of double taxation with respect to taxes on income and the prevention of tax evasion and avoidance should be taken into consideration by the Claimant in order to eventually claim a deduction of his tax obligations in Spain.
11. At this point, the DRC judge wished to stress that, in spite of all of the above, there is no need to enter into a deep analysis regarding whether the club should be held liable to pay the amount requested by the player, insofar the parties validly concluded a termination agreement dated 8 May 2019 (cf. point I.4 supra) whereby both parties waived their right to claim anything from the other.
12. In particular, the DRC judge wished to emphasize that the termination agreement entered into between the parties contains, in clause 3 thereof, a valid waiver in accordance with which the parties “expressly state that no claims will be made against one another judicially or extra-judicially”.
13. In view of the above, the DRC judge decided that, having the said termination agreement been validly concluded between the parties, it is binding upon them and, by virtue of the legal principle of law, pacta sunt servanda, there is nothing to claim by any contracting party from the other.
14. The DRC judge concluded her deliberations in the present matter stipulating that the claim of the Claimant is therefore rejected.
III. DECISION OF THE DRC JUDGE
1. The claim of the Claimant, Jairo Morillas Rivero, is rejected.
2. The decision is rendered free of costs.
For the DRC judge:
Emilio García Silvero
Chief Legal & Compliance Officer
NOTE RELATED TO THE APPEAL PROCEDURE:
According to article 58 par. 1 of the FIFA Statutes, this decision may be appealed against before the Court of Arbitration for Sport (CAS) within 21 days of receipt of the notification of this decision.
NOTE RELATED TO THE PUBLICATION:
FIFA may publish this decision. For reasons of confidentiality, FIFA may decide, at the request of a party within five days of the notification of the motivated decision, to publish an anonymised or a redacted version (cf. article 20 of the Procedural Rules).
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