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Buy-out clauses and how they work in Spanish football

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123.16K   //    27 May 2015, 15:41 IST

If the selling club are okay with allowing the transfer of the player, then they might reach an agreement for an amount slightly over or under the buyout clause, depending on their relationship with the purchasing club. Usually, what then happens is that a sum is reached that is midway between the value of the buyout clause and the amount that would have to be paid if the taxes payable on the buyout clause were also due.

If the transfer is a hostile transfer, i.e the selling club does not want to sell and is forced into it due to the triggering of the buyout clause, it becomes a very different proposition. The selling club may take the stance that if it is an unwelcome bid, they will force the legal application of the clause. The legal application of the clause creates a very different price.

This can mean one of two things, both of which will vastly inflate the price. In the first case, it can mean that the Value Added Tax (VAT) is added. The rate of VAT in Spain is 18 per cent. There has been precedent for clubs agreeing to include VAT in the invoice of the transfer, which can then be claimed back from the state.

However, if the selling club feels that it is a hostile bid, it will not. This will mean that the buying club will have to pay the clause plus the 18 per cent. Thus, a footballer who has a release clause of €40 million will now cost a club €47.2 million.

The second option is for a club to refuse any transfers until it is absolutely forced to. This is where Decreto Real 1006/1985 kicks in and becomes applicable. However, this legal provision is exactly what it claims to be – a legally enforceable buyout clause. These exist to protect the “community rights” of footballers (i.e that a contract can be unilaterally broken subject to satisfaction of various conditions and a reasonable notice period) under various European Community Treaties.

The player deposits the stipulated amount in the contract with the Spanish football regulatory authorities and unilaterally breaks his contract. As mentioned earlier, that sum is given to him by the buying club in order to buy himself out. As soon as that money is transferred to his account, however, it is liable to taxation at a rate that ranges from 20 to 47 per cent. Thus, a player with a buyout of €40 million would now have a real-life cost of €58.8 million.

From this simplified analysis, it’s clear that there is a veritable myriad of regulations that have to be complied with for a club to purchase a player through activation of a Spanish buyout clause. It is a transaction that requires systematic planning through both legal and tax frameworks, and cannot be rushed through on deadline day.

Manchester United’s move for Herrera in 2013 was ruined due to confusion over his buy-out clause

Manchester United found this out the hard way last season, as their move for Athletic Bilbao’s Ander Herrera was scuppered not due to imposters”, as is often reported, but due to their unwillingness to try and hastily rush through a deal that involves a highly complicated system of regulations. 

Successful navigation of this system can be seen in the way that Bayern Munich were able to secure the signature of Javi Martinez from Bilbao in 2012, which was a patient, nearly month-long approach to ensure that all the formalities were adhered to.

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A buy-out clause offers protection to a club and its management. It allows them to set exorbitant numbers for players deemed valuable, to prevent them from being poached by larger clubs. It also serves as a sleight of hand.

In modern football, nearly every player has a price. The buyout clause sets the price for a player in the market and also gives them the answer when fans question why a star was sold.

The answer is simple – it’s because the buyout clause was met. The willingness of the selling club to part with the player will go a long way in determining the actual figure that the purchasing club will have to pay to secure their target.

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CONTRIBUTOR
Newbie lawyer. Chelsea FC fan with a keen interest in eSports (DotA specifically).
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