Playing in the Saudi Pro League? Is it Au Revoir or Goodbye? The taxman will really want to know…

As the dust settles following the closure of the Saudi Arabian transfer window, many Premiership and European clubs are now having to factor in the potential impact it will have on their squads and bracing themselves for yet another upward spiral in player wage demands. The impact will perhaps take a season to bed in for the clubs, but for players, managers and coaches that have chosen to go, the financial benefit will be more immediate. However, these individuals may find there’s a sting in the tail further down the line.It is widely known that, at present, there is no personal income tax in Saudi Arabia. This contrasts with a player “only” receiving 53% of their gross pay in the UK. So not only are they often moving for a higher gross salary they will also be getting all of it. Or will they?

UK individuals, and most other European nationals for that matter, are all taxable on their world-wide income if they are tax resident in their home country. Focussing on the UK, and simply put, this means that if they don’t break tax residency for the current tax year, they may still have UK tax to pay on their Saudi Arabian income.

We say ‘may’ rather than ‘will’ as the UK/Saudi Arabia Double Tax Treaty may also apply and take the income out of the UK tax net. Also, for 2024/25 and future tax years, if they live in Saudi, one would perhaps think that an individual would assume Saudi tax residency. This might be the case, but they could also retain UK tax residency and be dual resident.

Tax residency is arguably one of the most complex areas of personal tax. Despite the UK Statutory Residence Test (SRT) being introduced a decade ago, advisers are still required to look at it in detail when a taxpayer moves jurisdictions.

The term SRT is also perhaps a misnomer as it includes multiple tests that interact, and the tax outcome can turn on a single fact such that remaining ties with the UK (which are very broadly defined) can potentially generate a UK tax liability.

The fantastic sums on offer in the Saudi Arabian transfer window have focussed attention on football but the SRT can affect any UK-based individual involved in high profile international sport and can have a significant financial impact if not carefully considered by a suitably experienced tax adviser.

Perhaps the way to think of it is, if a player buys a £1m supercar they would be very careful about who they allowed to maintain it. It’s the same with personal tax and the SRT, it’s just as important to have the right specialist involved. The BDO Tax in Sport team can help.

Contact ian.clayden@bdo.co.uk or your usual BDO contact for more information.