US to take 30 percent of Newbee’s The International 2014 prize money in taxes

Newbee’s $5 million prize money from The International 2014 (TI4) is quite a hefty sum. Unfortunately, it just got a lot smaller because of Uncle Sam.

According to Newbee CEO CuZn, 30 percent in taxes will be deducted by the US government. Another 10% will be given to the Newbee organization itself, while the rest will be split between the five players.

In total, that comes to about $633,567 (RMB 3,929,002) per person. Very nice, considering the average annual income in China is about $8,070 (RMB 50,000). Although it’s noticeably smaller than the original perception of each player receiving over $1 million, I don’t think the players will be crying themselves to sleep.

And to those who think 30 percent is abnormally high: you are correct.

The International 2011 took place in Cologne, Germany, so players did not need to pay taxes.

The International 2012 allowed for tax reductions via an individual or organization’s Individual Taxpayer Identification Number (ITIN). This ended up reducing the original 30 percent tax to 10 percent.

The International 2013 champions, Alliance, hailed from Sweden, which has naturally high tax rates. In the end, each player only received about $60,000 in prize money.

(See: 4 reasons behind China’s poor performance at the DOTA 2 TI3 championship)

For The International 2014, the taxation was mostly due to unlucky timing as on July 1 this year, the Foreign Account Tax Compliance Act (FATCA) applied a new rule to foreign financial institutions (FFI):

In the end, Newbee simply decided to pay, instead of revealing financial information for everyone in the whole organization. Taxes: not fun stuff.

(via 178)