Shakira's Spanish Tax Evasion Charges Could Land Her in Jail, and She's Not Alone

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Shakira speaks during a press conference following the Meeting Of The Minds: Investing In Early Childhood Development As The Foundation For Sustainable Development Meeting at United Nations on Sept. 22, 2015 in New York City. 

In Spain, celebrities are routinely the poster children in the government's no-tolerance campaign against tax delinquents.

Shakira has been summoned to answer to charges of evading 14.5 million euros ($16.4 million) in taxes in a Spanish court on June 12, accused of committing six counts of fraud. If found guilty, she faces as yet unspecified fines and a possible jail sentence.

The case focuses on the years 2012-2014, when Shakira was allegedly already living in Barcelona with her husband, soccer player Gerard Piqué. If that proves to be true, in accordance with federal regulations, prosecutors contend she was therefore required to pay taxes on all of her worldwide income to the Spanish tax authority. 

But Shakira and her representatives have said that during those years she was still a resident of the Bahamas, where she had bought a house with her former boyfriend Antonio de la Rúa in 2004. She legally changed her residency to Spain in 2015, but now that date is under scrutiny. Even Shakira herself gushed during an interview on a Spanish talk show in 2011 that she was already "officially living in Barcelona" at that time. 

The prosecution alleges that for tax purposes, Shakira pretended to live abroad while really residing with Piqué in Barcelona. She also accused of using shelter companies to hide her earnings in tax havens, according to information from court documents published in the Spanish newspaper El Periodico and other Spanish media. 

Shakira was accused of tax fraud in December 2018, following an investigation into how many days she had lived in Spain before changing her residency in 2015. Spanish tax law requires that individuals who spend 183 days or more in the country are residents and must pay taxes there. 

The investigation monitored Shakira's activity, using paparazzi and social media photos as evidence of her whereabouts. Those included photos of the "Waka Waka" singer supervising the construction on the family's new home in 2012 while pregnant with her first son. She gave birth in a Barcelona hospital in early 2013. Investigators even interrogated a local hairdresser to determine the frequency of her appointments.

The investigation found that Shakira spent 243 days in Spain in 2012, 212 days in 2013 and 244 days in 2014. Prosecutors claim that during that period, Shakira did not spend "one day" in the Bahamas, even though she claimed residency there. 

Shakira's representatives noted in a statement previously sent to Billboard that "intense professional activity takes her all over the world, and as such, her business and family models are very different from conventional models." But even if Shakira had not spent over 183 days in Spain, according to Spanish tax law she could still be considered a resident during those years because her "vital interests" -- her home, partner and children -- are there, and days she spent outside of the country could be qualified as "sporadic absences." 

In early 2018, Shakira paid the Spanish tax agency, called Hacienda, more than 20 million euros (almost $25 million dollars) in back taxes, for money owed for 2011, the year after she met Piqué, eliminating that year from the investigation's purview. Subsequently, she reportedly paid another 14.5 million euros for the years 2012-2014 as a good faith measure before the charges became public.

"Shakira has at all times fulfilled her tax obligations and owes no money to the Spanish Treasury," Shakira's rep said in the statement. "As soon as she was made aware of the amount that according to the Tax Agency she owed, as a gesture of good faith, she made the payment in full, and, therefore, there are currently no monies owed." (The singer's representatives did not respond to two requests from Billboard for further comment on the charges and Shakira's court summons.)

Still, Spanish prosecutors have pressed on with the case, news of which, given Shakira's extraordinary fame, is gaining worldwide attention. But she is not exactly being singled out. In Spain, celebrities are routinely the poster children in the government's no-tolerance campaign against tax delinquents. 

Every year in Spain, Hacienda publishes its list of biggest tax deadbeats, which reliably includes high-profile artists, athletes, television personalities, business owners and financiers. Spanish pop icon Miguel Bosé was among those who made the list in 2018, owing 1.869 million euros ($2.1 million). Bosé has frequently been bashed as a deadbeat on social media since his arrears became public and moved to Mexico two months after the black list was published. The next list is expected to be distributed in June.

Eduardo Montejo Rodrigo, a lawyer with Madrid-based sports and entertainment law firm Senn, Ferrero and Associates calls the infamous list "an educational or informational campaign about fiscal responsibility."

"The idea generally is so the public will be aware of their responsibility to pay taxes and that they know that they need to fulfill their obligations," he says.

Of course, in addition to that trickle-down effect on the Spanish public, the intention is also that those celebrities whose debts have been outed will quickly make arrangements to pay up. 

"These famous people are like scapegoats," says another attorney, who requested anonymity. "Their reputation will be damaged if all of a sudden it comes out that they didn't pay taxes. What they want above all is that no one knows about it." 

That kind of public shaming is a tradition that goes back generations in Spain, to a quasi-folkloric figure called "El Cobrador del Frac," a debt collector wearing a black frock coat who darkens the doors of people with outstanding bills. The cobrador, in a costume of top hat and tails, waits outside the deadbeat's home, visits their place of work and basically shadows them until they are so mortified that they are forced to settle their bill. Such collectors saw a boom during the Spanish economic bust of 2008-2014, but today, with that kind of shaming easily accomplished on social media, the costumed cobradors could go the way of landlines. 

But their spirit is alive in the tax administration's cases against public figures, news of which has become frequent fodder for headlines in the Spanish press and has virtually travelled the world from there. Argentine soccer great Lionel Messi, also a Barcelona resident, was sentenced to 21 months in prison for his tax offenses in 2017, but got off with a fine. This past January, Real Madrid's Cristiano Ronaldo paid an 18.8 million euro ($21.1 million) fine after pleading guilty to tax fraud. In addition to a slew of other soccer players, actor Javier Bardem, singer Ana Torroja (of seminal Spanish pop group Mecano fame) and the late opera diva Montserrat Caballé have also been in Hacienda's cross-hairs.

While Shakira's and other recent cases do not reflect an abrupt change in Spanish tax rules, they do show a stricter response to failure to pay taxes in Spain, as well as decisions about whether that failure to pay is considered a criminal -- rather than merely administrative -- offense. A delinquent amount of over 120,000 euros ($135,000) can potentially be a question for the courts if the tax agency determines that there was a deliberate intention not to pay the taxes. 

Attorney Eduardo Montejo notes that for artists "there are two things to be aware of: the issue of fiscal residence and also the cases in which an artist does not get paid directly, they are paid through a company." 

To close loopholes, the Spanish tax authority has imposed restrictions on how much individuals can be paid through a representative business entity. 

"They've said, listen, if you have a company that has no real activity, the company has to pay at least 75 percent of the money earned by the company back to the individual who earned it," Montejo explains. "This is because, for example, a band can bill everything through a company, but what is really important in a band is not the company, it's the people who create the songs, who composes who sings and plays the instruments. What is really important is the artistic or personal part. The tax administration is saying that the individuals have to pay taxes for the money made by the company. 

"You can't have a band that earns 2 million euros every year and then have the individual members of the band, who are the ones who compose and perform the songs, each declaring earnings of 3,000 euros a year." 

Current Spanish tax law also maintains strict criteria for image rights, putting a high burden of taxation on earnings from rights on the individual, rather than the company to whom he or she leases those rights. 

Given this panorama, foreigners should not expect to be wooed to Spain with tax incentives.

"The tax policy that has established in the last few years has hardened when it comes to tax breaks," says Montejo. "They've reduced the incentives that existed in the past for people to come to live in Spain. That contrasts with other European countries which are providing incentives to bring foreigners to their countries, like Portugal and Italy."

"In Spain, tax allowances have been drastically reduced," he adds. 

While Spain has set the stage for Shakira's current tax woes, her situation with Spanish Hacienda reflects the reality for any international artist today. 

"Artists have to coordinate their international tax commitments and make sure that they adequately comply with international conventions," says Montejo, who has clients who, between their country of residence, country of origin and countries where they earn income have had to declare income in up to four countries in a year. "It is important to determine what amount of taxes has to be paid in each country according to national and international regulations."

"The tax authorities have access to increasingly more sophisticated technology which allows them to collect more taxes and the communication between different countries is more and more agile," he adds. "Today, with the reporting technology that exists, the tax authorities are enabled to detect any mechanism or structure that aims to evade taxes. And the use of tax shelters in some cases can put you at risk for criminal charges."


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