Brazilian giants stunned by Club World Cup tax bombshell | OneFootball

Flamengo and other Brazilian clubs are facing complex tax obligations ahead of their participation in the revamped Club World Cup in the United States. Having initially considered setting up American companies to deal with tournament revenues, Flamengo, alongside Fluminense, Botafogo, and Palmeiras, opted instead to adhere to the U.S. "effectively connected income" (ECI) tax regime. This approach treats their earnings from the tournament in a similar manner to American firms for tax purposes.

The clubs' decision is shaped by the significant taxation levels they will encounter. The U.S. Internal Revenue Service will impose taxes of up to 37% on the portion of players’ and select staff salaries corresponding to days worked on American soil during the tournament. Not every participant is affected, as exemptions apply to individuals earning less than $3,000, but for most senior squad members and staff, the impact is unavoidable. The exact tax owed will be computed proportionally, comparing the days worked in the U.S. to the full annual remuneration of each individual.

Prize money, described by FIFA as the “participation pillar,” is also split for tax purposes. Of the total $15.21 million allocated collectively to these Brazilian sides, 52% is considered earned in the U.S.—for which taxation applies—while 48%, tied to qualifying achievements and image rights outside the U.S., remains tax-free.

Additionally, any profit left after deducting operational costs—such as travel, accommodation, and flights—faces a further 21% U.S. tax. Then, should Flamengo remit any of this to Brazil, another 30% “dividend” tax will be deducted, modeling U.S. outflows typical of foreign corporate earnings.

These stacked levies have generated clear frustration among the clubs, especially as FIFA routinely secures blanket tax exemptions from host countries for the men's World Cup. In this case, however, the exemptions do not extend to the participating clubs or their players.

FIFA has set out a staggered payment schedule for distributing Club World Cup prize money, with major dates in late May, June, August, and September 2025. Each club has been assigned a virtual wallet to manage these transactions and track deductions.

With such burdensome taxation, Flamengo and their Brazilian counterparts continue internal discussions and seek solutions to reduce the financial hit—though, for now, their participation in the Club World Cup will be subject to the full array of U.S. tax demands.

Source: Globo