TAXATION AND ENFORCEMENT PROTECTION OF BONUSES PAID TO ATHLETES
Entrance
Financial incentives provided to athletes are not only a means of improving performance but also a crucial element of the contractual relationship between clubs and athletes. These incentives are often paid under the name of "bonuses." However, both the taxation of these payments and their status in enforcement law for athletes in debt are subjects of debate.
This study will examine in detail the nature of bonuses paid to professional athletes under Turkish tax legislation, their evaluation from the perspective of income tax and withholding tax, their seizure status, and the protection mechanisms in enforcement law. A fictional case study will also be included to illustrate the practical application of the subject.
1. Definition and Legal Nature of Athlete Bonuses
Bonuses are additional payments made to athletes by clubs, federations, or sponsoring organizations in return for individual or team achievements. These payments may be explicitly stipulated in the contract, or they may be based on custom or internal regulations.
According to the Turkish Code of Obligations No. 6100 and the Turkish Civil Code No. 6098, a bonus is a non-commercial, performance-based incentive payment between an athlete and a club. However, if it is regular and predictable, it can be interpreted differently, approaching the concept of "wage.".
2. Athlete Bonuses from a Tax Legislation Perspective
a) Evaluation from the Perspective of the Income Tax Law
Article 61 of the Income Tax Law No. 193 defines the concept of "wage" as encompassing money and in-kind benefits provided in exchange for services, as well as benefits that can be represented in monetary terms. In this context, bonus payments should wage income .
Article 94/1 of the Income Tax Law , income tax withholding is mandatory on such fee payments. Sports clubs, generally acting as tax responsible parties, are obligated to calculate and pay this withholding tax to the state.
b) Evaluation from the Perspective of Corporate Tax Law and Stamp Duty
Bonus payments may also be subject to stamp duty if they are stipulated in a contract or protocol. However, although some income earned by clubs for sporting activities is exempt from corporate tax, bonus payments are considered and declared as expenses for corporate tax purposes.
3. Attachability and Enforcement Protection of Athlete Bonuses
The types of income subject to attachment and the exceptions are regulated within the framework of the Enforcement and Bankruptcy Law (EBL). According to Article 83 of the EBL, a certain percentage of regular income such as salaries, wages, and pensions can be attached.
a) Bonuses that are considered wages
If the bonus is stipulated in the contract in a regular and predictable manner (for example, a bonus of 50,000 TL for each win), this bonus part of the wage . In this case, according to Article 83 of the Enforcement and Bankruptcy Law, garnishment is possible, but the percentage limit (e.g., ¼) must be taken into account.
b) Bonuses or Rewards
If bonuses are performance-based and irregular payments, some Supreme Court rulings have held that they cannot be seized , or only a portion of them can be seized. This is because they are considered "rewards for performance, not compensation for personal labor."
4. Fictional Case Study
Event:
Professional football player Umut G. has signed a 3-year contract with XYZ Sports Club, which competes in the Süper Lig. The contract includes a monthly salary and a bonus of 100,000 TL for each victory.
In the 2023-2024 season, 18 wins were achieved, resulting in a total of 1,800,000 TL in bonuses, which were paid. However, due to debts stemming from Umut G.'s personal life, his creditors initiated enforcement proceedings, placing liens on his bank accounts and assets owed to him by the club.
Problems:
-
Are bonus payments wages or rewards?
-
Can these premiums be seized?
-
What is the club's tax liability?
Solution:
-
Nature of bonuses: Since these bonuses are included in the contract and are paid regularly and predictably, they should be considered as "wages". According to Article 61 of the Income Tax Law, they are subject to income tax.
-
Attachability: According to Article 83 of the Enforcement and Bankruptcy Law, since these premium payments are considered wages, they can be attached up to 1/4. However, attaching the entire amount of the premiums would be unlawful. The Supreme Court has similarly ruled that "if athlete premiums are regular and continuous, they are considered wages, and the attachment rate should be observed."
-
Tax liability: XYZ Club is obligated to withhold and declare income tax on bonus payments. The contract should also be reviewed for stamp duty purposes.
5. Supreme Court Decisions and Case Law
"In professional athlete contracts, bonuses stipulated in the contract and paid based on certain achievements are considered wages if they have become a continuous benefit. It is unlawful to seize all of these payments."
“The bonus payment made to the athlete is considered an annex to the employment contract. The club is obligated to withhold tax on it.”
These precedents demonstrate that the tax and enforcement law consequences of bonus agreements between athletes and clubs vary depending on the nature of the agreement.
6. Legal Obligations of Clubs
-
Tax obligation: Income tax must be withheld from premium payments, declared, and paid.
-
Responsibility regarding enforcement proceedings: If there is a garnishment order on payments made to the athlete, the payments must be made to the enforcement office, or partial payments must be made taking into account the garnishment rate.
-
Contractual structure: Bonus payments should be clearly and verifiably regulated in the contract. Otherwise, bonuses can become subject to arbitrary practices.
Conclusion
Bonuses paid to athletes are significant payments in the Turkish legal system, both in terms of taxation and enforcement. The legal nature of these bonuses varies depending on the terms of the contract and the actual practice. Regular and contractual bonuses are considered wages, are taxed accordingly, and can be garnished.
Clubs have both financial and legal responsibilities. In this context, clubs should take care to avoid making mistakes in their dealings with tax authorities and enforcement offices. Athletes should also pay attention to these issues when preparing their contracts and seek professional legal support when necessary.
Gamze Akbulut, Law Faculty Student
About Post Author
