Club news

FINANCIAL PROBLEMS FOR DEPOR

16 Mar 2017
After almost three years, the Supreme Court has finally decided regarding the €21.7 million that were frozen in the bank account of Deportivo, and the decision is negative as the debt with the Tax Agency is now 73% higher.

The Supreme Court has revoked a previous decision regarding the payment of the debt with the Tax Agency. The dispute was coming from 2014 as the club and the Tax Agency (supported by the Bankruptcy Administration) disagree about the qualification of the €21.7 million that were frozen in the bank account of Deportivo after the bankruptcy was made official.

This money was a pending payment of the TV rights that was made before the bankruptcy was approved. The banks and the Tax Agency requested an embargo as former president Augusto César Lendoiro refused to negotiate with them after the club failed to pay the debts in previous years.

The Tax Agency argued that the €21.7 million should have been qualified as privileged debt and therefore it should have not been included in the debt that qualified for the 33%discount according to the agreement signed with the Spanish Treasury back in 2014.  The club argued the opposite as it understood that the money was already at the club before the mentioned agreement was signed. The Provincial Court in A Coruña made an initial decision that was favorable to Deportivo.

But the case was appealed and taken to the Supreme Court. Now that the initial decision has been revoked the current debt with the Tax Agency has passed from €30 million to €52 million and must be paid in five years. It means that Depor would have to pay €10.4 per year, which represents the 24% of the expected income for this season (€44 million).

This is something that drastically reduces the money available for the composition of the teams and therefore it is resting competitiveness for a club fighting at the top flight. Currently the salary cap of Deportivo is €24.7 million, an amount that’s only above the €22.13 of Sporting Gijón. With this new scenario the Galicians could have the lowest salary cap in the coming seasons.

The board of directors is studying a couple of options in order to reduce the problem, one of them is to renegotiate the debt with the Tax Agency increasing the time to pay the debt, the other is to sell the debt to a third party. The latter option will also help to reduce the cost and at the same time it would give a margin at the moment of building up the teams for further seasons.

ARCHIVE NEWS MAR/17

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