In the Netflix heavyweight clash between Jake Paul and Anthony Joshua, the real winner was the IRS, which could take a massive bite out of Joshua’s earnings.
Taking place in Miami on Dec. 20, the performative boxing match saw Paul, wearing Hulk Hogan–inspired tank tops, get dominated by Joshua, who smirked before delivering the final, bone-crushing punch.
The Tax Man Calls
Paul is recovering in the hospital with a double broken jaw after being knocked out by Joshua in the sixth round, but behind the battered face and crooked smile is a financial reality that favors the American.
Paul reportedly is expected to keep more of his purse than his British opponent — but is that true? The answer seems to rely on the U.S. and UK tax agreement.
Reports estimate that each fighter earned roughly $92 million to $93 million from a total purse of about $184 million, the Daily Mail reported, though some industry insiders have suggested the guarantees may have been closer to $40 million to $50 million apiece, Sports Illustrated reported.
Though some outlets like Punch and Bleacher Report have reported that Paul and Joshua purse was about $267 million, meaning the payout to both fighters is closer to $140 million apiece.
The claim originated from Paul’s X account.
Either way, the bout ranks among the most lucrative paydays in modern boxing.
Joshua, a U.K. Citizen who fought on U.S. soil, faces the heaviest tax burden.
He owes the United States the top federal income tax rate of 37 percent, along with additional U.K. income taxes and National Insurance contributions on his global earnings. But there is a deal in place between the two countries, so that there is not double taxation on the same income.
Other outlets are claiming that Joshua could lose roughly about $66 million in taxes.
Paul is subject only to U.S. federal taxes but since he lives in Puerto Rico (a U.S. territory) , he is at a benefit. He pays U.S. federal taxes but benefits from Puerto Rico’s tax incentives (Act 60), which significantly reduce his income tax burden by potentially exempting him from U.S. federal income tax on certain earnings while residing there, though he still pays other federal taxes and Puerto Rico taxes on some income.
Meanwhile, Joshua is a U.K. citizen who has earned money in the U.S. There is something called the U.S.–U.K. foreign tax agreement, formally known as the “Convention between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains.”
The silver lining for Joshua is that he may be able to claim foreign tax credits, which allow U.K. residents to offset taxes paid in the U.S. against their U.K. tax liability.
This helps prevent him from paying both the full U.S. rate of 37 percent and the full U.K. tax rate on the same income.
By claiming the U.S. tax paid as a credit, Joshua can reduce his overall tax burden in the U.K.
But since the actual amount of his earnings for the match cannot be confirmed, it is difficult to estimate just how much the boxer will have to dish out in taxes.
Way cool! Some very valid points! I appreciate you writing this article plus the rest of the site is really good.