FC Barcelona, four time winners of the European Cup/UEFA Champions League, paid Spanish tax authorities 13.6 million euros ($18.7) today. The $18.7 million is an effort to cover tax irregularities related to the signing of Neymar.
Investigations into the football club began Thursday by a judge at Spain’s National Court. The Court alleges that Barcelona’s financial responsibility was compromised, as they should have originally withheld taxes of 9.1 million euros from Neymar. Barcelona describes their payment to Spanish government as “complimentary”.
A club statement said, “The aim is to cover eventual interpretations that could be given to the contracts drawn up in the operation to sign Neymar.”
No charge has been levied against the football club and the board of directors stands firm in their position of innocence. The interpretation of the payment appears to be retribution for unintended complications in Neymar’s massive contract.
Sources have varied in their value estimate of Neymar’s contract with some speculating that the transfer fee from Brazilian Club Santos is the largest in European football history. Neymar would replace Gareth Bale as number one on the expanding list of football millionaires. Real Madrid paid between 91-100 million euros to transfer Bale from Tottenham in 2013.
The contract value distinction might of lead to suspicion by Spanish government. According to Businessweek, FC Barcelona paid Neymar 37.9 million euros ($51.9 million) through 2013. The $51.9 million is not salary or bonus, but instead incentive to join the team. When taking into account all contracts the transfer fee could equate to more than 100 million euros ($138 million). A material discrepancy in contract value has potential for tax issues.
“The board denies the existence of any tax-related crime. The club has scrupulously fulfilled its tax obligations,” stated Barcelona.
A club member first asked inquired about the intricate details of the Neymar contract. Neymar’s transfer has nine separate contracts and is labeled as “financial engineering” by public prosecutor Jose Perals.
Following the club member’s questions, a judge opened up preliminary questions to Barcelona’s front office on Jan. 23. A day after, turmoil sparked as team president Sandro Rosell relieved his duties.
Rosell has guaranteed financial prudence in FC Barcelona business operations, which makes his exit an untimely one from a legal perspective. The same Spanish court that issued the tax fraud case against Barcelona will apply separate investigations into Rosell for misappropriated money.
This is not the first instance of a Barcelona player being involved in alleged tax evasion. Lional Messi and his father, in a case separate from FC Barcelona, appeared in court last year to provide evidence related to payments from PepsiCo Inc., Adidas AG, and other companies. Messi was charged with 4.2 million euros in tax evasion and then paid 5 million euros to cover interest.
In 18 games with the club Neymar has 7 goals and 8 assists. Off the field distractions are problematic for a team in the middle of conference play. Especially for Barcelona who expects to compete for a Spanish La Liga title each year.
FC Barcelona paid the $18.7 million in the Neymar tax fraud case, but investigations continue in the legal dispute.
Editorial By Niles Olson