Club World Cup teams facing tax threat in new blow to expanded tournament

Fifa is facing complex negotiations with the US authorities before the Club World Cup after failing to secure tax exemptions for the 32 competing clubs.

The world governing body announced a huge prize fund for the tournament of $1bn (£754m) in March, including up to $125.8m for the winners, but without tax agreements clubs could be left with bills of tens of millions of dollars to the US tax authorities on top of tax payable in their home countries. At least 29 clubs from outside the US, including Chelsea and Manchester City, will be competing.

Fifa has obtained exemptions from a range of taxes for the 2026 World Cup games in the US, with competing nations exempted from many city, state and ticket-sales taxes, but with the schedule for the Club World Cup put together at shorter notice it has been unable to secure similar dispensation. The 12 venues were announced only in late September, less than nine months before the tournament.

Fifa is also grappling with other complexities, such as the differing tax rates between states, which could result in clubs losing out by virtue of where they have played. For example in Florida, home to two Club World Cup venues in Miami and Orlando, there is no state income tax. Most other cities which will stage matches are subject to a state income tax, although the rates vary from 3% in Pennsylvania to 7% in California.

Paris Saint-Germain play two of their three group games in Los Angeles so could end up the worst affected. Manchester City could also cash in because their final group fixture is against Juventus in Orlando, whereas Chelsea’s group matches are in Pennsylvania and Atlanta, where income tax is 5.5%.

In another complication some US states do not recognise the federal government’s “double taxation treaties” with other countries, which prevent individuals and companies being taxed twice for their earnings by different regimes. This anomaly could lead to certain clubs being hit financially but not others. Fifa is pressing for a solution which ensures they are all treated fairly.

It is understood to be confident of achieving that, having made great efforts in recent months to get close to important US decision makers. Gianni Infantino met Donald Trump twice in March and took the new Club World Cup trophy to the Oval Office, and last week Fifa’s president visited the FBI.

Fifa declined to comment but sources with knowledge of the negotiations said it was supporting the competing clubs while complying with US tax rules.

Although the size of the prize pot, funded by a global TV deal with the streaming company Dazn, has led to concerns that the money could destabilise domestic leagues, Fifa is confident this will not prove to be the case. A significant proportion of the prize money will be swallowed up by tax bills, player bonuses and other operational costs, and for the biggest earning European clubs their Club World Cup income is replacing revenue they would have made from summer tours.

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Fifa is allocating appearance and prize money according to a complex formula based on each club’s historical performances and the size of their local market, but essentially the biggest European clubs will get paid most.

Chelsea and City will receive $38.19m before tax and expenses just for turning up, and clubs will get $2m for each group-stage win, $7.5m for reaching the last 16, $13.1m for reaching the quarter-finals, $21m for getting to the semi-finals and $40m for winning the final, with $30m for the runner-up.

Fifa has committed to assigning $250m of the $1bn Club World Cup fund to solidarity payments to clubs across the world not taking part. It is also paying $1m to each of the 11 host cities as a legacy payment.

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