A new problem may erupt in the world of Formula 1, this time far from the track and the competition for points. The Italian tax services began to closely examine the earnings of drivers and team members related to starts at Italian facilities. The matter is serious because it is not only about tax subsidies. In extreme cases, the consequences may also reach the level of criminal liability.

The Italian tax authorities have decided to tighten their approach to the regulations regarding taxation of foreign athletes competing in the country. Formula 1 drivers who have been racing on Italian tracks in recent years have come under the microscope. Officials want to check whether the income earned from such performances has been properly accounted for. This means problems not only for the players themselves, but also for the teams and people working to support the teams.

The Italian tax office checks the income of Formula 1 drivers

The crux of the problem comes down to the principle that foreign athletes earning income during events organized in Italy should pay tax there. For a long time, however, the enforcement of this obligation was not uniform, which is why many people may have assumed that the topic remained in practice dead. Now the situation has clearly changed, and officials have also started to return to earlier seasons.

The proceedings are expected to cover both current and former F1 drivers. Members of the staff working on the teams are also of interest. In practice, this means that the matter does not concern individual names, but the entire community associated with races organized on Italian soil.

Inspections may also cover earlier seasons

One of the biggest problems is how to determine what part of a driver’s annual earnings should be allocated to starts in Italy. Formula 1’s top stars earn tens of millions of dollars a year, but their contracts do not operate on a simple single-race pay model. This makes accurately calculating the tax due extremely complicated.

That is why the Italian services are planning very detailed audits. This applies not only to basic contracts with teams, but also to sponsorship contracts and other documents allowing to establish a full picture of revenues. Only on this basis will officials want to determine what part of the remuneration was related to sports activity in Italy.

Drivers and teams may have a serious problem

For some players, the rate is much higher than a regular surcharge. If the unpaid tax exceeds EUR 50,000, the case may be treated not only as an arrears to the tax office, but also as a crime. This means the risk of much more serious consequences, including severe financial penalties and criminal liability.

Such a scenario means that the topic suddenly ceases to be solely an accounting issue. In Formula 1, where huge amounts of money are an everyday occurrence, it is relatively easy to imagine a situation in which the amounts in dispute will quickly exceed the statutory threshold. Therefore, it is no longer just about sorting out old settlements, but about a real threat to the persons subject to inspection.

Which races are affected?

In recent years, Formula 1 has raced in Italy on three tracks, so these places are becoming crucial to the whole thing. It’s about:

• Monza, where the Italian Grand Prix was held,
• Imolę, host of the Emilia-Romagna Grand Prix,
• Mugello, where the Tuscan Grand Prix was held.

It is the starts at these facilities that are to be analyzed by the Italian authorities. The scope of proceedings may be wide, because we are talking about several seasons and many paddock participants, not only the most famous drivers.

It is worth adding that the issue of taxation of non-residents in sports is not unique to Italy. Similar solutions also exist in other countries, including Great Britain, Australia and the United States. The difference, however, is that now the Italian services have decided to approach the enforcement of the regulations much more decisively than before. This may trigger an avalanche of questions, disputes and analyzes that will go far beyond the competition on the track.

This means a new front of tension for the Formula 1 world. Teams and drivers will have to focus not only on preparations for the next races, but also on organizing documents, contracts and old settlements. And this may turn out to be as demanding as fighting for fractions of seconds on the fastest tracks in the world.