The 2026 World Cup is shaping up to be a game-changer for smaller football nations. With the tournament just around the corner, FIFA has secured a major tax break from the US Treasury that will benefit all 48 participating teams. This agreement is a huge relief for countries without existing tax treaties with the US, which would have faced significant financial burdens.

Imagine playing in the World Cup without the worry of losing a chunk of your earnings to taxes. That's the reality now for teams from smaller or emerging football economies. The US Treasury has agreed to let national associations apply for federal tax exemption under section 501(c)(3) of the US Internal Revenue Code. To qualify, teams must operate as non-profit bodies, not distribute profits to private shareholders, and avoid political activity.

While this breakthrough is a huge win for FIFA and the participating nations, there's still a catch. State and local taxes will still apply in many cases, depending on where the matches are played. Tax rates vary wildly across the US, with some states having no income tax at all. This means that a team's final tax liability will depend not only on how far they progress but also on where their matches are scheduled.

This "postcode lottery" is a concern for teams that may not have the same financial resources as their European counterparts. The financial implications of the original situation were particularly significant for nations without double taxation agreements (DTAs) with the US. These agreements reduce or eliminate certain tax liabilities, but many smaller nations didn't have them.

FIFA has increased the total prize and participation fund by 15% to $871 million, with each team guaranteed at least $12.5 million. But without tax exemptions, smaller nations would have struggled to fund their domestic football development. This breakthrough is a welcome relief for them, and it's a testament to the hard work of FIFA and the US Treasury in finding a solution.