| Ayça AKÇAY, Lawyer | Tuna YELKEN, Trainee Lawyer |
ABSTRACT The historical operation of football clubs under an association structure in Turkey has provided these clubs with significant tax advantages. However, the transformation of football into an industrial structure has led to the inadequacy of the association model from financial and structural perspectives, bringing the conversion of clubs into capital companies to the agenda. With Law No. 7405 on Sports Clubs and Sports Federations (“Law No. 7405”) that entered into force on 26 April 2022, the concepts of “sports club” and “sports joint-stock company” have been incorporated into the legal system. This study examines the process of football clubs’ transition from associations to joint-stock companies and the consequences this transition generates from the perspective of tax law. A comparison is made between association and company statuses in terms of corporate tax, VAT, withholding tax, and taxation of sponsorship revenues; furthermore, the extent to which exemptions and exceptions continue is discussed. The examination reveals that despite the advantages clubs obtain through incorporation from managerial and financial perspectives, no radical change has occurred in terms of tax burden. Keywords: Football Clubs, Association, Tax Advantage.
Keywords: Football Clubs, Association, Tax Advantage.
INTRODUCTION Football clubs, which are universal and increasingly transforming from merely a sport into an industrial structure, have become more important in Turkey given that football is the most watched sport with the largest fan base. Turkey’s first official football club is the Cadi-Keuy Football Club (Kadıköy Football Club), established in 1902 under the chairmanship of Lafontaine and Mr. Horace Armitage.¹ Indeed, over time it has become common to have a football club in every province, and today, in addition to provincial football clubs, there are many clubs that are recognized on a broader scale and have substantial fan bases. These football clubs in Turkey were organized under an association structure for a long period, and this model provided clubs with tax facilities such as corporate tax exemption and various exceptions. However, with modern football becoming a large-scale industry, it has been observed that the association structure remains inadequate in terms of revenue diversification, attracting investment, and providing financing.² In this context, many clubs have de facto begun to incorporate by transferring their professional football branches to joint-stock companies or by establishing subsidiary companies.³ Law No. 7405 has legally recognized this de facto transformation and incorporated the concept of “sports joint-stock company” into legislation. This article will address the process of football clubs’ transition from the traditional association structure to incorporation and the reflections of this on their tax statuses.
I. THE ASSOCIATION MODEL AND THE INCORPORATION PROCESS A sports club in association status is a structure that cannot legally pursue profit and is administered by organs such as the general assembly formed by members and the board of directors. In this model, club revenues must be allocated solely to club purposes, and any potential profit cannot be distributed among members. One of the most significant advantages provided by association status is that associations are not subject to corporate tax in tax treatments.⁴ Furthermore, unless an association establishes an economic enterprise and engages in continuous commercial activity, many tax liabilities do not arise. Indeed, in the past, sports clubs preferred to remain in association status to benefit from these tax advantages.⁵ On the other hand, with professional football taking on an industrial structure, certain disadvantages of the association model have become apparent. Since associations are restricted in engaging in commercial activities, they struggle to effectively utilize revenue sources such as large-scale sponsorships, broadcasting revenues, and merchandise sales. The joint-stock company structure is more suitable than the association structure in terms of attracting external investment, creating funds through capital increases, and accessing credit. Indeed, the public offering model was implemented by football clubs in Turkey for the first time in the 2000s, and clubs obtained significant amounts of capital by selling their shares on the stock exchange.⁶ The impossibility of public offering under association status demonstrates that incorporation has become mandatory from this perspective.⁷ Moreover, joint-stock company status also provides clubs with the flexibility to make investments in non-sports areas; for example, commercial ventures such as real estate development and retail sales can be undertaken in the club’s name. Obviously, such activities exceed the limits of association status and cannot be realized without incorporation. With Law No. 7405, a special legal entity category independent from associations has been introduced under the name “sports club.” The Law defines a sports club as “a private law legal entity that registers with the Ministry for the purpose of participating in the activities of the Ministry of Youth and Sports and sports federations.” Another innovation introduced by the Law is the concept of “sports joint-stock company.”⁸ In summary, the transition of football clubs in Turkey from the traditional association structure to the joint-stock company model is based on economic and structural rationales. Although tax advantages made the association model attractive for a long period, the increasing financial needs of clubs and competitive pressure have made incorporation inevitable. Law No. 7405 has also legalized this de facto situation, defined a new status for sports clubs, and clarified the path to incorporation. The possibility of going public has also made incorporation more attractive for club owners. For sports clubs that incorporate through going public, funds are created on a one-time basis; debts are closed by selling part of their shares to the public or to a strategic partner. The money collected as a result of this sale either remains with the main partner or stays within the publicly offered company. In the event that shares are sold to a strategic company partner, it will be inevitable for this partner to have rights in management. Another alternative is that the financing of sports or social facilities owned by clubs is provided through shareholders within the framework of a real estate investment trust project. The most important benefits that going public will bring along are long-term financing provision and transparency. The Capital Markets Board (“CMB”) has determined additional criteria regarding the going public of football clubs.⁹ Indeed, some differences will also arise in terms of partners’ responsibilities with the transformation of football clubs into sports joint-stock companies.¹⁰ In the next section, the effects of clubs’ incorporation on tax liabilities will be addressed.
II. THE EFFECT OF INCORPORATION ON TAX LIABILITIES The incorporation of football clubs by exiting association status brings along certain significant changes from the perspective of tax law. These changes essentially manifest themselves in the types of tax to which clubs are subject and in exemption/exception provisions. Below, differences between association and joint-stock company statuses will be examined based on subjects such as corporate tax, value-added tax, withholding tax, and taxation of sponsorship revenues.
2.1. Corporate Tax Liability Sports clubs in association status are not directly corporate tax taxpayers according to Turkish tax legislation. Article 2 of the Corporate Tax Law No. 5520 (“CTL”) has deemed economic enterprises belonging to associations or foundations as corporate tax taxpayers. Therefore, if a sports club association generates revenue while carrying out amateur or professional sports activities, these revenues constitute an economic enterprise within the club and in principle fall within the scope of corporate tax. However, there is a special exemption for sports clubs here. Pursuant to Article 4/1-(j) of the CTL, it is stated that economic enterprises of sports clubs registered with the Ministry of Youth and Sports or autonomous sports federations that engage in training and sports activities are exempt from corporate tax. Similarly, joint-stock companies engaged exclusively in sports activities are also considered exempt from corporate tax within the scope of this paragraph. This regulation grants sports clubs a significant tax privilege. Indeed, in a Revenue Administration Presidency (“RAP”) private ruling, it has been stated that the legal entity of a sports club accepted as an association will not be a corporate tax taxpayer; and in case remuneration is received in return for club activities, the economic enterprise formed will belong to the registered sports club and will be exempt from corporate tax provided that it engages only in sports activities.¹¹ After incorporation, if the football club carries out its activities under the umbrella of a sports joint-stock company, in principle this capital company will be a corporate tax taxpayer. However, since the aforementioned CTL paragraph also provides exemption for sports joint-stock companies, no de facto corporate tax burden arises as long as the club’s activities remain limited solely to sports. In other words, if a Sports Inc. obtains all its revenues from sporting events (match proceeds, broadcasting revenue, sponsorship, advertising, etc.) and does not engage in non-sports commercial activities such as restaurant, hotel, or store management, its corporate earnings are not subject to tax. On the other hand, if revenue-generating activities outside sports are conducted within the Sports Inc., these activities will be evaluated as a separate economic enterprise and will be subject to corporate tax. For example, in the event that a Club Inc. engages in side businesses that generate continuous revenue, such as sales of jerseys, sports equipment and souvenirs, or operation of parking lots and restaurants, the earnings obtained from this part will not be within the scope of exemption and will be taxed.¹² Therefore, while incorporation may have an effect of increasing the tax burden if the club’s field of activity is to be expanded, there is practically no difference between an association and a Sports Inc. in terms of corporate tax in the execution of purely sporting activities.
2.2. Value-Added Tax Practices It is explicitly regulated in the VAT Law that associations are not directly Value-Added Tax (“VAT”) taxpayers, but deliveries and services realized by economic enterprises owned by or affiliated with associations are subject to VAT. From the perspective of sports clubs, when a club carries out revenue-generating activities with its branches, these activities are generally evaluated as an economic enterprise affiliated with the association and VAT arises. Indeed, in the VAT General Implementation Communiqué (“Communiqué”), it has been stated that fees obtained from football player transfers and leases made by professional football branches of sports clubs operating in association status do not fall within the scope of VAT since they are mandatory transactions directly related to sports activity. On the contrary, if a sports club operates in the form of a joint-stock company, the situation is reversed. Trading companies are subject to general VAT provisions for all deliveries and services they make. As explicitly stated in the VAT General Communiqué, all deliveries and services of organizations engaged in sporting activities in joint-stock company status are subject to tax. That is, an incorporated sports club must apply VAT for every delivery of goods or provision of services it makes, subject to other exception provisions being reserved. This includes football player transfers. For example, when a Football Inc. sells its player to another club, it must calculate VAT at a rate of 20% for this sale, show it on the invoice, and declare it to the tax office.
2.3. Withholding Tax Practices Whether sports clubs are in association or company status, they are obligated to make income tax withholding as an employer in terms of athletes and personnel they employ. The taxation of athlete salaries in Turkey is subject to a procedure different from the general wage regime due to special regulations in the Income Tax Law No. 193 (“ITL”). Pursuant to Article 72 provisional of the ITL, wage payments made to professional athletes are subject to income tax deduction at fixed rates.¹³ These taxes are withheld at source by the club, declared and paid; athletes generally do not submit tax returns separately. Fees paid to amateur athletes have been exempted from income tax within a certain limit. However, with the recent amendment made by Law No. 7440 on Restructuring of Certain Receivables and Amendment of Certain Laws (“Law No. 7440”), the possibility has been introduced for withholding taxes paid by sports clubs to be refunded to clubs under certain conditions and spent on sports infrastructure. This is an indirect support mechanism for clubs and covers clubs in both association and company status. It should be emphasized that the aforementioned withholding tax obligation remains valid regardless of whether the club is an association or a company. That is, a sports club; whether it is a club exempt from tax in association status or a joint-stock company, when paying a football player transfer fee to a club abroad, must make the tax deduction at the rate of 20% and declare and transfer this to the Treasury. The club’s exemption from corporate tax does not eliminate the obligation to make withholding. However, if there is a Double Taxation Avoidance Agreement (“DTAA”) between Turkey and the relevant foreign country and this agreement stipulates a lower tax rate, it is possible to apply that rate. In practice, this situation requires examination of the tax agreement provisions with the relevant country.
2.4. Tax Status of Sponsorship Revenues Pursuant to Article 89/8 of the ITL and Article 10/1-(b) of the CTL, sponsor companies can deduct 100% of their sponsorship expenditures for amateur sports branches and 50% for professional sports branches from the income they declare.¹⁴ This deduction encourages the sponsor from a tax perspective and incentivizes resource transfer to clubs. In practice, half of the expenditures for sponsorships made to professional football clubs can be written off as expenses, and the entirety for amateur branches. Advertising or promotional services provided by clubs within the scope of sponsorship are not exempt from VAT. From the club’s perspective, the amount received from the sponsor is of a commercial income nature. Even while in association status, when clubs obtain sponsorship revenues, these are considered economic enterprise income and although they would normally need to be taxed, no de facto corporate tax burden generally arose due to the exemption valid for sports clubs. The situation is similar after incorporation. When a Sports Inc. obtains sponsorship revenue, even if this income is included in corporate earnings, it is within the scope of corporate tax exemption if it engages only in sports activity. Due to the nature of the sponsorship expenditure, since sponsor companies can make deductions, the tax advantage actually arises on the sponsor’s side. The most important issue from the club’s perspective is that there is no withholding exemption or more advantageous VAT situation in case the sponsorship revenue is directed toward amateur branches.¹⁵
2.5. Other Taxes and Financial Liabilities There are a number of tax privileges that sports clubs benefit from in association status. For example, if clubs in association status have the status of an association for public benefit, a tax deduction opportunity is provided to those who make donations due to donations and aids made to them. In terms of inheritance and transfer tax, donations and bequests made to sports clubs for public benefit may also benefit from exemption. Again, exceptions for sports clubs have been regulated in the past in real estate tax and customs tax legislation. For example, facilities used by amateur sports clubs may be exempted from real estate tax, or facilities such as customs tax exemption in the import of sports equipment may be available. Clubs in association status also have the right to collect donations without permission and can receive financial aid from public institutions. Some of the aforementioned advantages, since they depend on the club’s public benefit status, may become directly inapplicable in the event of transformation into a joint-stock company.
CONCLUSION The historical operation of football clubs under an association structure in Turkey has provided significant tax advantages for many years. Corporate tax exemption, withholding tax refunds, sponsorship incentives, and certain tax exceptions have made the association status of clubs attractive. However, the increasing industrialization of football has led to an increase in clubs’ financing, investment, and management needs; the association model has become unable to respond to these needs. This situation has led clubs to de facto pursue the path of incorporation and ultimately to the legal recognition of the sports joint-stock company status with Law No. 7405. From the perspective of tax law, incorporation has not created a radical change in terms of revenues arising from clubs’ sporting activities. In both association and sports joint-stock company status, revenues obtained exclusively within the scope of sports activities continue to be exempt from corporate tax. However, in the event that the club expands its field of commercial activity, earnings arising from these activities become subject to corporate tax. From the VAT perspective, incorporation has created a more visible effect; in the joint-stock company structure, all deliveries and services have become subject to general VAT provisions. In terms of withholding tax and sponsorship revenues, it is observed that the change of status does not create a decisive difference, and current regulations are valid for both structures. Consequently, the incorporation of football clubs has not created a revolutionary change in tax liabilities; it has rather provided a transformation in terms of governance, transparency, investment, and financing opportunities. While tax exemptions and exceptions are largely preserved, incorporation has presented clubs with a new framework in terms of corporate governance and financial discipline. Therefore, the incorporation process of clubs is essentially a consequence of the need to adapt to the financial sustainability and corporate structure required by modern football, rather than a pursuit of tax advantage or disadvantage.
FOOTNOTES
¹ Ercan ALPTÜRK, “Football Industry with Financial and Tax Dimensions” MDERGI/8911A.019, Lebib Yalkın Legislation Journal, June 2005, No.18
² Halil Berk ERDOĞAN, “Legal Structure of Sports Clubs in Turkish Law and Incorporation of Football Branches” Turkey Bar Association Sports Law Committee Attorney Türker Arslan Festschrift Turkey Bar Association Publications, March 2021, p. 368
³ Begüm DİLEMRE ÖDEN, “Balanced Budget Obligation Within the Framework of Law No. 7405 on Sports Clubs and Sports Federations”, Yıldırım Beyazıt Law Journal, February 2025, p.453-478
⁴ Ömer AYKUL, “Associations Law”, 4th Edition, Seçkin Publishing, Ankara 2023, p.174-178
⁵ Sebahattin DEVECİOĞLU, Bilal ÇOBAN, Yunus Emre KARAKAYA, Özgür KARATAŞ, “Evaluation of Sports Clubs’ Tendencies Toward Incorporation in Turkey”, Spormetre Physical Education and Sports Sciences Journal, 2012, X (2) p.35-42
⁶ Capital Markets Board, “Incorporation and Going Public of Football Clubs: Evaluation of Beşiktaş, Fenerbahçe, Galatasaray and Trabzonspor Examples Within the Framework of Developments in the European Football Market”, Access Date: 6 October 2025 https://spk.gov.tr/data/61e48fc71b41c60d1404d68a/96018dac3db758424883ec20f126e310.pdf
⁷ DİLEMRE ÖDEN, op.cit., p.461
⁸ Aydın YÜCE, “Sports Joint-Stock Companies According to Law No. 7405 on Sports Clubs and Sports Federations and Comparison of These Companies with Other Joint-Stock Companies”, NEÜHFD, September 2022, p.486
⁹ ALPTÜRK, op.cit.
¹⁰ Court of Cassation 10th Civil Chamber’s decision dated 20.12.2023 and numbered E.2023/12143, K.2023/13122
¹¹ In the same direction: • Private ruling of T.C. Afyonkarahisar Governorship Defterdarlık Revenue Directorate, dated 26.05.2014, numbered 63611781-125[2-2013/9]-15 and titled “Corporate Tax Exemption of Sports Club Association” • Private ruling numbered B.07.1.GİB.4.07.16.01-KVK.2010.68-150 of Antalya Defterdarlık Taxpayer Services Revenue Group Directorate • Private ruling of Muğla Defterdarlık Taxpayer Services Revenue Group Directorate dated 03.08.2012 and numbered B.07.1.GİB.4.48.15.01-KDV/11-121
¹² Ali ÇAKMAKÇI, “Taxation of Sports Associations and Other Fiscal Law Issues-2016”, Access Date: 3 October 2025 https://www.adenymm.com.tr/spor-derneklerinin-vergilendirilmesi-ve-diger-mali-hukuk-konulari
¹³ İmdat TÜRKAY, “Taxation of Athletes and Refund of Tax Withheld from Athletes to Sports Clubs and Sports Inc.”, Nazalı Gündem, 02.08.2023
¹⁴ İmdat TÜRKAY, “Deductions and Limits to be Made in 2024 Income Tax Return”, Access Date: 2 October 2025, Nazalı Gündem, 10.03.2025
¹⁵ Private ruling of Bursa Defterdarlık dated 23.01.2017 and numbered B.07.1.GİB.4.16.16.02-130[I.14.44]-10 titled “Status of Expenditures Made Within the Scope of Sponsorship Agreement vis-à-vis CT, VAT”