FIFA Said to Study Tax-Avoiding Soccer Trades by U.K. Group

FIFA lawyers are working to shut down a tax-avoiding structure used in the transfer of dozens of Brazilian soccer players, including a recent Real Madrid signing, two people with direct knowledge of the situation said.

The trades, dating back to the 1990s, were together worth more than $60 million, according to Bloomberg News calculations. Investors buy the rights to players by nominally signing them to second-division Uruguayan clubs. They then loan them to Brazilian teams until they can move to wealthier clubs in Europe or Asia for a transfer fee. One of the players, Willian Jose da Silva, joined Real Madrid on loan this month.

Soccer’s Zurich-based governing body FIFA is trying to improve regulation of the $3.7 billion international transfer market as a judicial investigation into Neymar’s trade to Barcelona from Santos brings attention to player moves. FIFA General Secretary Jerome Valcke said on Jan. 23 there’s a “gray zone” of activity by third parties in trading that is difficult for the ruling body to control.

One of the Uruguayan clubs used as a conduit by investors is Deportivo Maldonado, a second-division team that says on its website that it allied in 2009 with a U.K. company it didn’t identify. Trading players through Uruguay cut the capital gains tax investors pay on transfer receipts to as little as 4 percent until last August, when government legislation increased the rate to 12 percent, a third person said.

Trip to Uruguay

FIFA officials traveled to Uruguay in July to gather information about the trades, and spoke to several clubs, although the ruling body didn’t immediately issue any instructions to stop the transfers, according to the people, who were granted anonymity because they can’t talk publicly about the subject.

Deportivo Maldonado acquired Da Silva for 1 million euros ($1.4 million) from Gremio in January 2011, and has since loaned him to elite Brazilian squads, including Neymar’s former club Santos, according to transfermarkt.com, which tracks player trades.

Real Madrid, soccer’s richest club by sales, said on its website on Jan. 27 that it signed the 22-year-old striker on loan to its B team, Castilla, until June, and has an option to sign him permanently. The Spanish club negotiated with English investors who work with the club, Da Silva’s agent Nick Arcuri said by phone from Sao Paulo.

A Real Madrid official said the transfer of Da Silva was approved by FIFA. Deportivo Maldonado lawyer Santiago Duran and sports director Ignacio Borjas didn’t immediately return calls seeking comment. A former Maldonado director, who spoke on condition of anonymity because he is no longer connected with the club, said the U.K.-based investors pay player salaries and other team costs in return for receiving most or all of the transfer income.

Three Moves

In another case, a second-tier Uruguayan club, Club Atletico Rentistas, transferred Brazilian forward Renato Carlos Martins Jr. three times in less than a year, documents on the Uruguayan soccer federation website show.

While there is no record on Rentistas’ website of Martins Jr., it traded him to Brazil’s Sao Caetano on Nov. 11, 2012, to China’s Zheijang Greentown on Jan. 14, 2013, and Portugal’s Portimonense on Sept. 5, 2013, the documents show, without giving more details.

Rentistas President Mario Bursztyn didn’t immediately return a call and e-mail seeking comment for this story. In an interview in 2012, he said the club receives a “fairly large” monthly retainer fee from Sao Paulo-based player agent Juan Figer for registering players. A spokesman for Figer said he complies with all the rules of his profession.

Manchester City

FIFA’s regulations make it difficult to shut down the so-called bridge trades because players can be registered with as many as three clubs per season, according to Ariel Reck, a Buenos Aires-based lawyer who has represented investors who have acquired player transfer rights.

Atletico Madrid last year traded defender Martin Demichelis to Manchester City of the English Premier League without him having started a game for the Spanish team. He had been contracted to another club, Malaga, two months earlier.

FIFA’s Valcke said it has had internal discussions about hiring a partner to act as a clearing house for international transfers to improve oversight.

“There is a gray zone and where it leaves some room for things to happen and not exactly as we will all wish for things to happen,” Valcke said, without directly addressing the trades of Brazilians via Uruguay.

A FIFA official declined to comment on the transfers.

Barcelona president Sandro Rosell quit Jan. 24, a day after a judge in Madrid announced he would examine whether some contracts in Neymar’s transfer from Santos -- including a 40 million euro payment to a company owned by his parents -- were irregular.

Rosell denies any wrongdoing, saying it’s reasonable for teams to keep some affairs confidential.

To contact the reporter on this story: Alex Duff in Madrid at aduff4@bloomberg.net

To contact the editor responsible for this story: Christopher Elser at celser@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.