UEFA are set to replace the current Financial Fair Play (FFP) regulations by the end of the year with a salary cap and luxury tax, according to reports.
The current rules were introduced 11 years ago and state clubs must balance the books over a three-year period.
The governing body announced earlier this year that they would review its FFP rules as a result of the financial crisis caused by the global pandemic.
According to The Times, proposals will be unveiled at a convention on the future of European football that UEFA are set to host in Switzerland next month.
The report states that clubs in European competition would be limited to spending a fixed percentage of their revenue, in the region of 70 per cent, on salaries.
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Any club in breach of those rules will have to pay a luxury tax where 'the equivalent or more' of any overspend would go into a pot to be shared among other clubs.
UEFA's plans have surfaced one week on from Barcelona's shock announcement that Lionel Messi was to leave the club this summer after they were unable to register him due to La Liga regulations.
As a result, the Argentine forward has joined French club Paris Saint-Germain on a free transfer, the striker signed a two-year deal worth a reported £25m per year earlier this week.
These proposals centre around the high levels of spending on player's salaries, but offers scope for clubs to spend beyond their income, provided they are willing to pay the luxury tax.
However, teams that repeatedly spend above the cap could face harsher sanctions, such as disqualification from European competitions, as UEFA believes clubs need to be deterred from overspending.
The report likened these proposals to the system used in the United States in Major League Baseball and the National Basketball Association.
UEFA are also set to make plans to prevent any future European Super League proposals, which Liverpool were controversially involved with earlier this year.
Speaking after the Super League collapse at the 45th UEFA congress, president Aleksander Ceferin said: "I have read that we are planning to abolish Financial Fair Play...
"Let me be clear: that is not going to happen. However, we do need to adapt it to the new reality.
"We need to encourage and release investments. We need to correct some of the injustices that Financial Fair Play may indirectly bring about in the current circumstances."
