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Ongoing discussions between STI and SLI: work of professional athletes should be attributed to labour or civilian relationship?

Hamletian discussions on whether work of professional athletes should be attributed to labor or civilian intercourse do not fall silent in media. Besides legal activity registration, question regarding taxes is relevant as well – if income under contracts of professional athletes should be numbered among incomes related to employment relations, and not to individual labour relations, athletes should pay much bigger income and State Social Insurance Fund (later – SSIF) taxes. In the discussion of the Labour Relation Commission under the Republic of Lithuania (20 May 2015, Protocol No. K2-8) regarding labour relation peculiarities in professional sport, Vilnius “Lietuvos Rytas” basketball club lawyer Laura Martinkutė stated that contract of professional athletes is attributed to civilian and not employment relations and Supreme Court of Lithuania has repeatedly declared this kind of position.

However disagreement between Institutions concerning this question reaches the daylight over and over. Director of Raimda Auditas UAB Daiva Žumbakienė is interested in this question as well. The aim of this article is to share insights published earlier in the press (“Verslo Žinios”) and to summarize Raimda Auditas UAB requests to State Tax Inspectorate (later – STI) and State Labour Inspectorate (later – SLI) regarding activity of professional athletes and answers from the Institutions.

On 16 October 2015 Raimda Auditas UAB sent a request to STI and SLI regarding treatment of activity of professional athletes. In inquiry it is actualized that in the Law on Personal Income Tax (later – LPIT) sports activities are defined as “activities of a sportsman (an individual exercising a specific physical or mental activity based on certain rules and organised in a particular form specially designated for such an activity) involving preparation for and participation in competitions.” Quotation of Commentary of LPIT, Article 6, Item 5.5., is also provided, and there is stated that sportsman’s activity is taxed “applying 15 percent (in the case it is related to employment relations or other sportsman’s activity income) either 5 percent (in the case it is incomes from individual labour relations registered under the rules of LPIT) income tax rate”. Moreover, all income related to employment relations are calculated with 39.98 percent fee to SSIF. Meanwhile engagement in individual labour relations is taxed with much lower fees (depending on the type of activity, etc.). Thus, the biggest uncertainty regarding taxation rises from LPIT itself, where dual taxation of sportsman’s income is indicated. Difference between two possible rates is cardinal. Finally, STI and SLI are asked to name differences between (i) activity related to employment relations and (ii) activity under individual employment contract. That is Institutions are requested to provide consultations regarding professional athlete activity attribution either to labour or civilian relationships. 

Institutions replied in different time, their answers were diametrical. Answer form SLI was received no later than a week after inquiry was sent (22 October 2015), meanwhile STI provided consultation only the following year (16 March 2016). 

SLI quoted the definition of employment contract provided in Labour Code of the Republic of Lithuania (later – LC) and distinguished three features of employment contract: “1) specific thing of employment contract: in employment contract it is agreed on performing a specific employment function, that is to perform a work of a certain profession, speciality, qualification or specific duties; 2) a person who is in employment relations must perform his duties in accordance with the work regulations established at the workplace; 3) the employer undertakes to provide the employee with the work specified in the contract, to pay him the agreed wage and to ensure working conditions as set in labour laws, other regulatory acts, the collective agreement and by agreement between the parties.” SLI also emphasized that “by employment contract only those legal relationship must be formalized which satisfies all features of employment contract named in Article 93.” In the letter there is not a word about possibility to attribute activity of professional athletes to employment relations. 

SLI emphasizes that “physical culture and sport specialists activity, fundamentals of professional sport development, organization principles of sport competitions and events, rights and duties of athletes, their training, and professional sport is regulated by the Law on Physical Culture and Sport of the Republic of Lithuania” (later – The Law). According to the Institution, professional athlete and athlete activity in sport organization must be formalized under sport activity agreement (contract) as stated in The Law, Article 35. Summarizing all aspects of The Law and answering to Raimda Auditas UAB request SLI states that “professional athlete, exercising sport activity in sport organization, with this institution makes sport activity agreement and not employment contract. Within parties arise civilian legal intercourse, therefore laws and regulations of employment legal relations are not applied.” Thus, it can be implied that relationship described in The Law cannot be equated to the relationship defined in LC, as a result they do not satisfy all labour relationship requirements raised in LC.

Meanwhile STI commentary to Raimda Auditas UAB request is opposite: income under athlete contracts should be taxed as employment related income and not as an income related to individual activity. SLI, by contrary to SLI, relationship defined in The Law attributes to labour related relationship: “Conditions of a contract, established in The Law, Article 35 <…>, essentially satisfies relationship established between employee and employer in employment contract, thus income under sport activity agreement (contract) is taxed with personal income tax as with employment relations or relations in their essence corresponding to employment relations related income <…>.”

Before Raimda Auditas UAB sent requests, peculiarities of employment relations in professional sport was examined by Tripartite Council of Labour Relation Commission under the Republic of Lithuania (20 May 2015, Protocol No. K2-8). It was stated that employment relationship described in LC differs from relationship which forms between athlete and sport organization that employed him/her in couple essential ways:

•Employment termination term;

•Employment of foreign nationals and minors; 

•Non-discrimination principle;

•Location of an employment;

•Labour dispute resolution bodies, etc.

As we can see, interinstitutional disagreements regarding labour relation of professional athletes attribution either to employment or civilian relations was and still is relevant.

According to the director of Raimda Auditas UAB Daiva Žumbakienė, it is clear for everyone that employment law in Lithuania is a concern of SLI. STI expressing their manifest position on employment law (field that this Institution has no direct responsibility) not just crosses their field of interest, but presumptively misleads taxpayers. Meanwhile activity of SLI is concerted – Institution does not comment on taxation that STI is responsible for and does not render commentaries or remarks on this field. Naturally consultations regarding employment law should be extended by SLI and not STI. Solving hamletian discussion on taxation of professional athletes – the one raised in the beginning of the article – auditor Daiva Žumbakienė recommends leaning on consultations that responsible Institution SLI is providing.


1. Response from the State Labour Inspectorate under the Ministry of Social Security and Labour of the Republic of Lithuania 22-10-2015 No. SD-25-12970.

2. Response from State Tax Inspectorate under the Ministry of the Finance of the Republic of Lithuania 16-03-2016 No.(32.41-GPM) RM-5309.