Doing a Football Deal in Germany

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Introduction

Welcome to the latest installment of our blog series, „How to Complete a Football Transfer Anywhere in the World.“ In this edition, we’ll be delving into the intricacies of completing a football transfer deal in Germany. Whether you’re an experienced football agent looking to expand your knowledge or an aspiring agent eager to learn the ropes, this series aims to provide comprehensive insights into the unique regulations and practices of football countries across the globe.

The main differences

When it comes to football transfers in Germany, understanding the intricate structure is essential for both experienced and aspiring football agents. The German football transfer system operates within two main windows each year, offering unique dynamics and challenges for agents, clubs, and players alike.

Germany follows a well-defined transfer calendar, with two crucial transfer windows each year. The first, a mid-season window, opens in January and lasts for a month. The second, more extensive window, takes place between seasons and runs from the 1st of July until the 1st of September, lasting approximately 60 days. These designated periods allow clubs to register players into their squads for the upcoming season, providing a structured framework for player movements.

The top two divisions of German football, namely the 1. Bundesliga and 2. Bundesliga, stand out for their high level of professionalism. Clubs within the first division have honed their transfer strategies over years of experience. Many possess well-established scouting networks, making it challenging for agents to propose unknown players. These clubs often rely on their internal scouting departments to identify potential talents in the most interesting markets. As a result, agents find that proposing unfamiliar players to these clubs can be a daunting task due to their robust existing networks.

In the 2. Bundesliga and 3. Liga, however, agents encounter different dynamics. These divisions offer a better chance for agents to present players who might not be on the radar of clubs yet. With fewer resources and potentially less extensive scouting networks compared to the top division, clubs in the lower tiers are more open to considering player proposals from agents. This presents agents with a valuable opportunity to bridge the gap between players seeking opportunities and clubs looking for fresh talent.

Germany’s football ecosystem is marked by its commitment to nurturing young talents. The country boasts an extensive network of youth academies, training facilities, and development programs that provide aspiring players with the resources and opportunities they need to grow. From grassroots football to top-tier clubs, the emphasis on skill enhancement, tactical understanding, and holistic player development creates an environment where young talents can thrive. The Bundesliga’s fast-paced style of play and tactical diversity further hones players‘ skills, equipping them to face challenges at domestic and international levels.

Germany’s football model goes beyond nurturing talent: it also emphasizes strategic investments and shrewd player transfers. Lots of clubs invest significantly in developing their squads, focusing on identifying and acquiring players with high potential. This investment not only enhances the competitive edge of the league but also positions clubs to maximize their returns through player sales. The Bundesliga’s global reputation for quality football and player development attracts scouts, agents, and clubs from around the world. This international interest results in robust transfer markets, where players often attract lucrative offers.

Figure 1: Distribution of associations by spending on and receipts from transfer fees in USD (2022) I Source: FIFA Global Transfer Report 2022

Navigating the German football transfer system involves not only understanding the transfer windows and their timing but also recognizing the varying landscapes within different divisions. While top-tier clubs rely heavily on established scouting networks, agents can find their niche in the lower divisions, presenting promising players to clubs eager to discover new talents. It’s important for agents to stay well-informed about the unique dynamics of each division and tailor their approaches accordingly.

Financial and payment details

When it comes to orchestrating football transfers in Germany, agents can enhance their success by strategically timing their deals, understanding the financial landscape, and navigating unique aspects of the German football market. In this comprehensive exploration, we delve into the intricacies that define successful transfer deals in Germany.

The optimal window for agents to strike deals in Germany is undoubtedly the summer transfer window. German clubs operate under a rather sustainable model, diverging from the trend of significant mid-season transfers observed in other countries. The January window sees German clubs reluctant to invest heavily in players unless major injuries or exceptional opportunities arise. The summer window, stretching from July to September, becomes the focal point for clubs to revamp their squads and secure talents for the upcoming season.

Figure 2: Top associations spending on and receipts from transfer fees in USD (2022) I Source: FIFA Global Transfer Report 2022

Player employment contracts in Germany share a standardized structure provided by the DFB (German Football Association). However, clubs customize these contracts by adding and modifying financial terms such as bonuses, image rights agreements, sell-on clauses, and agent commissions. Agents must navigate these intricacies while ensuring the contracts remain legally sound and aligned with German contractual and employment laws. Outsourcing specialized legal advice becomes crucial to avoid any surprises or disappointments.

A distinct feature of the German football market is its adherence to quoting financial details as ‚gross‘ values. This varies from the net values often used globally. Agents negotiate gross deals, encompassing all financial elements. This can lead to unfamiliarity for agents accustomed to net deals, potentially causing confusion and costly mistakes. Clear understanding and mastery of this difference are pivotal for agents navigating the German football market effectively.

Professional footballers in Germany pay regular taxes as employees of a football club. Although their salary is by no means equivalent to that of an average employee, the same tax conditions also apply to them. The personal tax rate is then well above the average, so that professional footballers in Germany pay up to 45% in taxes. While subject to regular employee taxes, they also earn substantial income through advertising revenue. They structure this income as part of a sole proprietorship, leveraging their increased notoriety to amortize personal rights annually. This strategic move effectively reduces taxable income, allowing footballers to save on taxes. The intricate interplay between income, taxation, and advertising revenue creates unique opportunities and complexities in managing financial aspects for both players and agents.

Working Visa Requirements

The dynamics of foreign player regulations in the Bundesliga have undergone a significant transformation over the years, reflecting the shifting landscape of international professional sports and legal decisions that have shaped the playing field. Delving into the historical context, we unravel the journey of foreign player regulations in the Bundesliga, highlighting pivotal moments and legal decisions that have shaped the current framework.

At its inception, the Bundesliga had strict limitations on the number of non-German nationals allowed to participate. Initially, only two foreign players were permitted to play in the Bundesliga. This number increased to three in 1992, gradually hinting at a potential opening of doors for international talent.

A landmark moment in the realm of European professional sports, the Bosman decision by the European Court of Justice (ECJ) in 1995 was a watershed moment. This ruling granted professional footballers within the European Union the fundamental freedom of movement for workers, effectively overturning existing regulations that placed restrictions on foreign players from other EU countries. This decision not only impacted football but also had far-reaching implications for foreign player regulations in various other professional sports.

Figure 3: The Impact of the Bosman-Ruling on the Number of Players Under Contract in Germany (Bundesliga) I Source: The Bosman Ruling: Impact of Player Mobility on FIFA Rankings, 2010

A pivotal turning point came during the 2006/07 season when restrictions on foreign player usage were generally lifted. An agreement between the League Association and the DFB facilitated the use of players from EU and UEFA member countries without limitations. While restrictions on EU players were lifted, the situation was different for non-European players.

The landscape further evolved with the introduction of regulations to promote local talent. Clubs were mandated to have a certain number of licensed German players under contract. In 2006/07, each club was required to have a minimum of four locally trained players under contract, and this number increased to six in 2007/08, and eventually to eight (4+4) since 2008/09. The definition of a club-trained player also stipulated specific criteria regarding eligibility during formative years, highlighting the commitment to nurturing talent within the local ecosystem.

Additional Points to Note

At the heart of German football lies a unique principle that sets it apart from many other leagues worldwide – the 50+1 rule. Embedded within the statutes of the DFL., the association representing 36 German professional clubs, this rule shapes the ownership structure of football clubs and ensures a distinctive approach to club governance and management.

The 50+1 rule was introduced in 1998 as part of a broader initiative to open license leagues to corporations. As football clubs spun off their professional operations into corporations to explore financing options and organizational integration with sponsors and stakeholders, the rule was established to maintain a balance between competitive sport and mass sport while preventing undue influence from external parties.

The essence of the 50+1 rule revolves around the principle of majority control and ownership. In essence, the rule stipulates that a corporation seeking a license to participate in the Bundesliga or 2. Bundesliga must have its parent club hold a majority stake in the corporation. This entails that the parent club must possess at least 50 percent of the voting shares along with an additional voting share in the shareholders‘ meeting of the corporation. This ensures that the majority of decision-making power remains with the parent club, preserving the club’s intrinsic values and identity.

When a partnership limited by shares (KGaA) serves as the licensee, further nuances come into play. In this scenario, the parent club or a subsidiary entirely controlled by it must occupy the position of the general partner within the KGaA. Even if the parent association’s share of votes is less than 50 percent, the 50+1 rule can be satisfied if the parent association holds a comparable position to a shareholder with a majority interest in the corporation. This necessitates that the general partner holds comprehensive powers of representation and management granted by law.

Figure 4: Ownership structure in the Bundesliga I Source: KPMG Football Benchmark Research, 2020

The 50+1 rule is emblematic of German football’s commitment to maintaining a balanced and equitable approach to club ownership. By preserving majority control with the parent club, the rule mitigates the risk of external influences compromising the core values and long-standing traditions of the club. It ensures that the interests of fans, local communities, and the broader footballing ecosystem are prioritized over the pursuit of profit.

Contrary to initial perceptions, the Bundesliga’s position in terms of overall revenues is not as lagging as it might seem when compared to other prominent European leagues that have opened their doors to investors. While the gap in aggregate revenues compared to the English Premier League is considerable, the Bundesliga proudly stands as the second-highest revenue generator, surpassing both La Liga and Serie A, despite the latter leagues accommodating two more teams than the Bundesliga’s 18. This achievement is attributed to a distinct revenue distribution structure within the Bundesliga that ensures a more equitable distribution across its three primary sources of income. This balanced approach mitigates the clubs‘ dependency on the substantial earnings derived from European club tournaments.

The Bundesliga’s unique stance in empowering fans plays a pivotal role in its success. Unlike other leagues, the Bundesliga allocates significant influence to fans, creating an environment that fosters a distinct stadium atmosphere, widely regarded as unparalleled among the top five European football leagues. This commitment to involving fans has yielded remarkable results, enhancing the overall experience for both supporters and players.

One of the remarkable hallmarks of the Bundesliga is its unparalleled attendance figures. With an impressive average of 43,000 tickets sold per game, the Bundesliga reigns as the world’s most well-attended football league. This speaks volumes about the league’s ability to draw fans to the stadiums, creating an electric atmosphere that resonates with the passion and dedication of football enthusiasts.

Summary

Completing a football transfer in Germany involves a deep understanding of the country’s specific regulations and practices. From the structured transfer system to financial considerations and high taxes, agents must navigate various complexities. This blog post serves as a starting point, offering valuable insights for experienced and aspiring football agents seeking success in the German football market.

Stay tuned for the next installment of our series, as we explore the unique intricacies of football transfers in different countries around the world. Whether you’re a seasoned agent or just beginning your journey, we’re here to equip you with the knowledge you need to succeed in the dynamic world of football transfers.