Swiss Soccer Club Invoked in FIFA Ruling on ‘Tax Havens’

A Uruguayan soccer team appealing a sanction for arranging sham player trades said FIFA should treat it the same as other clubs accused of facilitating tax avoidance including Switzerland’s FC Locarno, according to the ruling body’s judgment.

Institucion Atletica Sud America registered six Argentine players in 2012 for “extremely short” periods without intending for them to play at the Montevideo-based team, FIFA said March 5. Earlier that year, Argentine’s tax agency named Sud America and FC Locarno among 10 clubs from Uruguay, Chile and Switzerland operating as “sports tax havens.”

It’s common for investors to acquire the transfer rights of Argentine players and they can avoid capital gains tax by routing income offshore via Uruguay, according to Ariel Reck, a lawyer in Buenos Aires who has worked on such trades. They would pay a 35 percent rate in Argentina, Reck said. Switzerland levies an 8.5 percent tax rate on capital gains, according to a 2013 report by auditor Deloitte LLP.

FC Locarno, acting on behalf of a group of investors, acquired 50 percent of the transfer rights of Argentine striker Gonzalo Higuain from River Plate of Buenos Aires six months before his 2006 transfer to Real Madrid, according to a 2007 report in the La Nacion newspaper. The transfer fee was 13 million euros ($17.9 million), Spanish sports daily Marca reported at the time.

Sud America is appealing a player-trading suspension and fine of 40,000 Swiss francs ($45,000) announced March 5. It wrote to a FIFA disciplinary committee last year to say that if it received harsher handling than FC Locarno it would be a “serious affront to the principles of equal treatment and non-discrimination,” according to a copy of the judgment seen by Bloomberg News.

Tracking System

In the judgment, FIFA dismissed Sud America’s argument, citing a legal principle which says defendants can’t claim equal treatment to someone else who has acted illegally without sanction. The principle is recognized by Swiss and sports legislation, the judgment said.

FIFA declined to comment for this story on Sud America’s disciplinary case or discuss whether it is investigating FC Locarno or any other of the other eight teams identified by Argentina’s tax agency as “sports tax havens.”

FC Locarno, based about 130 miles south of FIFA’s Zurich headquarters near Switzerland’s border with Italy, is last in the Swiss second division and had as few as 340 spectators at one of its home games this season.

Sharing Gains

The club president Stefano Gilardi declined to comment for this story, according to a colleague who answered the phone today at a clinic where he works as a doctor in Locarno. His son Gabriele, who is FC Locarno’s sports director, didn’t return an e-mail. A club official said by phone no one else was available for comment.

According to the judgment, Sud America said it only received a percentage of each transfer fee and gave most of the payment to the player, who in turn might have had a deal with investors or his agent. It said it couldn’t stand in the way of a player if he wanted to leave.

In a March 11 e-mail, FIFA said that only since it introduced an electronic transfer-tracking system that was made mandatory in October 2010 has it been in a better position to monitor player trades.

Citing a lack of evidence, FIFA dropped an investigation into player agent Juan Figer, who between 1999 and 2008 oversaw at least $56 million of trades of Brazilians through a Uruguayan team, Club Atletico Rentistas, for which they never played, according to Bloomberg News calculations.

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