Lexi Shields, University of Minnesota Law School
Shakira, the Colombian pop star known for iconic Latin hits such as “Whenever, Wherever” and “Hips Don’t Lie,” finds herself in the public eye for more than just her music career—for several years, she has been in a legal battle involving allegations of tax evasion.[1] The case began in December 2019, when Spanish officials accused Shakira of failing to pay 14.5 million euros during the 2012 to 2014 tax years.[2] In September 2023, additional charges were brought against Shakira for the alleged tax evasion of 6.7 million euros on her 2018 income, some of which was derived from an advanced payment for Shakira’s El Dorado World Tour.[3] With the trial for the 2012-14 taxes starting on November 20, 2023, this blog post will delve into the details of the controversy, the intricacies of tax residency requirements, and the potential consequences Shakira may face.[4]
The central question of Shakira’s case is where she resided between 2012 and 2014.[5] Though her official residence is stated to be the Bahamas, she is eligible to face the taxation requirements of another country if she spends a substantial portion of her time in that country.[6] Prosecutors argue that she spent over half of her time during each of those years in Spain, thereby requiring her to pay Spanish taxes.[7] Further, they believe that she diverted money to “companies domiciled in countries with low taxation and high opacity.”[8] Shakira’s defense team seeks to prove that she spent over half of her time in the Bahamas, thereby evading Spanish taxation.[9]
Under Spanish law, if one spends more than 183 days per calendar year in Spanish territory, they are considered a resident of Spain and can be taxed as such.[10] As a resident under Spain’s tax code, Shakira would be required to pay income tax for all incomes obtained, no matter the country of origin.[11] Thus, although her tour was international, all her income derived from the tour would be taxable by Spain. If Shakira was found to have spent less than 183 days in Spain, she would be considered a non-resident and only required to pay income tax on her income obtained in Spain.[12]
Shakira’s official country of residence, the Bahamas, is a jurisdiction listed as “non-cooperative for tax purposes” by the European Union (EU) as of 2023, though it has been added and removed from the list several times since the list began in 2017.[13] By placing the Bahamas on its list, the EU designates the country as one who has “failed to fulfil [its] commitments to comply with good tax governance criteria within a specific timeframe or…[has] refused to do so.”[14] The Bahamas is colloquially considered a “tax haven” because it lacks an income tax, capital gains tax, inheritance tax, and company taxes.[15] Though establishing a permanent residence in a “tax haven” does not guarantee a guilty outcome, Spanish tax authorities may ask for proof that the taxpayer spent 183 days in the tax haven during that calendar year.[16]
Shakira’s tax controversy serves as a reminder of the complex nature of international tax laws, residency rules, and the consequences that anyone can face for spending too many days in a foreign jurisdiction. As her case heads into trial next month, Latin pop fans and legal scholars alike will be watching to see how it unfolds.
[1] Spain charges pop singer Shakira with tax evasion for a second time and demands more than $7 million, Associated Press (Sept. 26, 2023, 5:45 AM), https://apnews.com/article/shakira-spain-taxes-prosecutors-court5d3698158bc565ac1dc6134c7d3baaa7
[2] Id.
[3] Shakira owes $7 mln in second Spanish tax fraud case, prosecutor says, Reuters, (Sept. 26, 2023, 8:08 AM), https://www.reuters.com/world/shakira-owes-7-mln-second-spanish-tax-fraud-case-prosecutor-says-2023-09-26/#:~:text=Prosecutors%20argue%20that%20she%20was,low%20taxation%20and%20high%20opacity%22.
[4] Id.
[5] Associated Press, supra note 1.
[6] What is the difference between being a Resident and a Non-Resident in Spain?, Immigr. Lawyers Spain, https://www.immigrationspain.es/en/resident-vs-non-resident/ (last visited Oct. 6, 2023).
[7] Reuters, supra note 3.
[8] Id.
[9] Associated Press, supra note 1.
[10] Impuesto sobre la renta de las personas físicas (Personal income tax) Gobierno de España, https://administracion.gob.es/pag_Home/en/Tu-espacio-europeo/derechos-obligaciones/ciudadanos/trabajo-jubilacion/fiscalidad/impuesto-renta.html#-a98550e12ce4 (last visited Oct. 6, 2023).
[11] Id.
[12] Id.
[13] EU list of non-cooperative jurisdictions for tax purposes, Eur. Council of the Eu. Union, https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-jurisdictions/#countries (Oct. 5, 2023).
[14] Id.
[15] Billy Kenber, The world’s most popular tax havens, The Times, (Mar. 6, 2019, 5:00 PM), https://www.thetimes.co.uk/article/the-worlds-most-popular-tax-havens-n6j9vc7mk.
[16] Gobienro De España, supra note 10.