The Unfair Taxation Of Olympic Prizes And The Importance Of A Second Passport

For athletes, participating in the Olympics is perhaps one of the most important milestones in their professional careers. Just imagine training so hard for most of your life, getting better at what you do, and finally, being able to compete internationally.

What’s more, could you fathom how it feels to train for four entire years with just one goal in mind: getting an Olympic medal? So thought thousands of Olympic athletes in Paris 2024, but little did they know that a portion of their hard-earned rewards would be taken away from them. By whom? The taxman.  

Governments worldwide have demonstrated that they are greedy and only there for the good times—namely when you make money. After four years' worth of work (if not more, considering an entire sports career), some governments will tax their athletes on the cash prize and, even worse, the estimated value of their medals. 

When I say taxation is theft, I really mean it. Many business owners, entrepreneurs and workers feel this exact sentiment after working their tails off, only to see a huge chunk of their earnings coercively seized by their country’s government. 

That’s why, in this article, we will discuss the outrageous taxation of Olympic medalists, and how it further serves to highlight the importance of a second passport to protect your wealth and freedom.

Many athletes train since they are children and dedicate the rest of their lives to the sport, in most cases, with financial support only from their families

THE REALITY OF OLYMPIC PRIZE TAXATION

Many look up to professional athletes, as they symbolize dedication, work ethic, and discipline. Even though not all athletes make millions of dollars, the best can cash in handsomely. Think of guys like LeBron James, who’s won another gold medal with the U.S. and has acquired lots of wealth during his entire career. Well, these successful individuals are the preferred targets of the taxman…

OVERVIEW OF TAXATION ON OLYMPIC PRIZES

When you watch the Olympics, you probably see the heads of state of each country supporting their athletes, acting as if they really care about them. Government officials show up to these special events, but when it comes to the money athletes earn, it is suddenly taxed as regular income. Let’s see some examples here:

UNITED STATES

The United States considers Olympic prizes, including both the cash award and the estimated value of the medals, as taxable income. While athletes earning less than $1,000,000 USD annually are exempt, the IRS's taxation of this income is still mind-boggling. 

SINGAPORE

According to the Singapore National Olympic Council, all awards are taxable. Essentially, all income derived from getting an Olympic medal is considered regular income. For instance, a gold medallist would be granted a $1,000,000 SGD (roughly $755,686 USD) compensation, thus reaching the highest income tax bracket of 24%. 

SPAIN

Spain also taxes these cash prizes, considering them as employment income, and they are subject to Personal Income Tax (IRPF). A gold medallist playing an individual sport would cash in €94,000, putting them well in the 45% income tax bracket.

MEXICO

Mexican Olympic medalists must pay a 20% income tax on cash prizes from sports activities, which are not tax-exempt. Prizes over $600,000 USD must be reported to the tax authority. However, if athletes receive government support, the resources received will not be considered taxable income, provided they are received through programs included in the Federation’s Expenditure Budget.

BRAZIL

This is an interesting case. In August 2024, after severe pressure from the right, Lula decided to make the cash prizes received in the Olympics tax-free. Before that, it was considered regular income, taxed up to 27.5%. 

BELGIUM

In Belgium, cash prizes are considered income and are subject to Personal Income Tax (IPP). The taxation follows the country's progressive rates. A Belgian gold medallist gets paid €50,000 (roughly $54,644 USD), which is used to pay the top income tax of 50%. Following the Tokyo Olympics, a reduced tax rate of 16.5% was implemented; however, it remains uncertain whether this will be applicable in 2024.

SWITZERLAND

In Switzerland, cash prizes are taxed as income. Tax rates vary according to the canton and the taxpayer's total income. A Swiss gold medallist gets paid a bonus of around $44,000 USD.

NETHERLANDS

In the Netherlands, cash prizes qualify for taxable income, as the tax authorities claim athletes are serving the country's Olympic Committee. A gold medallist earns a €30,000 bonus (roughly $32,786 USD), thereby paying an effective income tax of almost 37%.

WHY TAXATION ON OLYMPIC PRIZES IS UNJUST

Imagine spending multiple years working on your business, making money, saving, and investing. When others realize you’re successful and they’re not, they suddenly feel entitled to your economic results as if they were part of the process.

That’s exactly what professional athletes feel after putting in the work day in and day out, training multiple hours, eating the right food and investing in equipment. However, when they get an Olympic prize, the government suddenly appears to claim its piece of the pie. It’s like a toxic partner who’s only there when everything goes well. 

The International Olympic Committee (IOC) does not compensate winners directly; instead, each country’s Olympic committee pays a certain amount. For example, the U.S. pays a meagre of $37,000 USD for every gold medal, while countries like Singapore, Malaysia, and Morocco offer more generous incentives (over $200,000 USD). Regardless of how much each country pays, taxing these awards is unfair, insulting those who work and sacrifice themselves to represent their countries. These prices should be rewards for personal achievement, not taxable income.

One interesting tax situation is Joel Embid, who holds American, French and Cameroonian citizenship. While it’s true that he’s making millions of dollars by playing in the NBA, in the future, perhaps in the future, he should consider renouncing his American citizenship and choosing to reside in another country to avoid worldwide taxation. However, his case might be more complex as he derives most of his income from his presence in the States—and so do many other athletes. While professional athletes might find it difficult to avoid income taxes in their home country (at least during their professional careers), many entrepreneurs and high-net-worth individuals could definitely explore a second passport to tap into tax-friendly jurisdictions.  

TAXATION IS THEFT

One of libertarianism's core tenets is ‘taxation is theft,’ and the taxation of Olympic prizes exemplifies this belief. For libertarians like me, taxation is inherently coercive because it involves the government taking a portion of an individual’s earnings. This act violates personal property rights, as the government, without the individual's consent, claims ownership over a portion of their hard-earned income.

When it comes to Olympic prizes, this perspective becomes even more evident. Athletes spend years, sometimes decades, mastering their craft. They pursue excellence, investing time, money, and energy into their training. These athletes not only represent their countries but also achieve deeply personal milestones. Yet, after all this perseverance, the government steps in to take a portion of their earnings.

The government is, in and of itself, one of the biggest obstacles to wealth creation and economic growth. It feels entitled to the fruits of hardworking individuals' labour as if it had contributed to their professional achievements, only to waste that money and increase public debt to justify more tax hikes in the future. 

This coercive act is even more outrageous when you consider athletes who are not wealthy. Not everyone is like Stephen Curry or Novak Djokovic. With burdensome taxation and excessive bureaucracy, the government makes the lives of its citizens more difficult.

Simone Biles, Rebeca Andrade and Jordan Chiles, respectively, medalists at the 2024 Paris Olympics

THE SOLUTION: A SECOND PASSPORT?

In a world where governments are increasingly eager to take a portion of your hard-earned income, securing a second passport has become necessary to protect your wealth and freedom. Far from being a mere travel document, it can be a powerful tool to protect yourself against oppressive tax regimes. 

A second passport is what I call political insurance. When things go south in your country, you can have an extra passport to hedge against risks and benefit from more favourable tax policies. This flexibility may allow you to choose a jurisdiction where your income (yes, including Olympic prizes) is not that taxed or not taxed at all. 

For athletes, it might be tricky to avoid taxation, as they often live in the country they represent or somewhere with high tax rates. However, for many business owners and high-net-worth individuals, a second passport could be the difference between losing a significant portion of their earnings to taxes and keeping more of what they’ve worked so hard to achieve. 

For instance, St. Kitts and Nevis, with its own citizenship by investment (CBI) program, does not impose taxes on personal income. Depending on your ancestry, you might be entitled to a passport by descent; you can check your genealogical tree and see if you have any ancestors in countries with strong passports. There are multiple ways to get a second passport, so find which route works best for you and, of course, choose a country aligned with your financial and personal goals. Remember that at Expat Money, we are committed to helping you set up your perfect Plan-B. 

Athletes and entrepreneurs who have worked hard for their success should consider securing a second passport to protect their earnings from oppressive taxation, ensuring their wealth remains in their pockets

CONCLUSION

Certain countries' taxation of Olympic prizes demonstrates how greedy governments are about claiming a share of athletes’ hard-earned money. This also applies to anyone out there building a business and making money. Governments disregard hard-working individuals’ sacrifices and dedication. They couldn’t care less about the process; they only care about their piece of the pie. 

For athletes who have dedicated their lives to their craft, the last thing they should have to worry about is losing a portion of their well-deserved earnings to taxes. The same applies to entrepreneurs, business owners, and high-net-worth individuals who have worked tirelessly to achieve success.

While athletes often carry out their professional activities in the countries they represent, you can still find ways to protect your wealth and ensure that you retain more of what you earn. Securing a second passport is a good strategy—a powerful tool that offers not only a hedge against oppressive tax regimes but also the freedom to choose a jurisdiction that aligns with your financial and personal goals.

A second passport may help you put yourself in a country where your income is respected—and not taxed to death. Remember, there are multiple avenues to second citizenship. If you’ve got the capital, you can purchase a second passport and become a citizen of a tax-friendlier country in a matter of months.  

All in all, you have worked hard for your success; do not let the government take its so-called fair share. Your money should always be where it belongs: in your pockets. Plan ahead and secure a second passport to secure your freedom and financial future.