The tax authorities are looking into Shakira’s residency during the years 2011-2014, with the belief that she was a de facto Spanish resident.
As a result, her worldwide income would be liable for taxation in Spain.
In February 2017, the Spanish authorities confirmed they were targeting high net worth individuals after information sharing through the Common Reporting Standard went live.
Not just the days
International tax lawyer Miles Dean, managing partner of Milestone International Tax, said: “Residence in Spain is determined not simply by the number of days in the tax year an individual is present in the country, but also by whether the individual’s centre of vital interests is located there.
“In other words, Shakira could, in theory, have spent less than 183 days of the Spanish tax year in the country, but if her home, partner and other interests were in Spain then she could be caught out.”
Shakira’s partner, since 2010, is Barcelona footballer Gerard Pique, who is the father of her two children.
The singer officially made Spain her country of residence in 2015, the same year in which the Beckham Law was reinstated.
“This law, which was introduced to attract higher earners to Spain by taxing them on a territorial basis – ie tax would only apply to Spanish source income – had previously been amended in 2010 to limit its application,” Dean explained.
“However, from 2015, all ‘employment’ income, foreign or Spanish, is taxed as a Spanish source of income, while other non-Spanish source income – for example royalties, performance fees, etc – will continue to fall outside the scope of Spanish taxation.”
Expat angle
Few expats will qualify for the Beckham Law, introduced specifically so the football legend could protect his income while playing for Real Madrid.
However, those who opt to remain non-residents, and limit their time in Spain to 183 days per financial year, could fall foul of the Spanish tax authorities if it thinks it worthwhile to pursue them.
Dean said: “Shakira, like many other high-earning individuals, will fall under the taxman’s spotlight at some time during their career. It isn’t unusual for the taxman to scrutinise an individual’s residency status, as this will often determine whether they are taxed on their worldwide income if resident, or only on a source basis if non-resident.”
He added: “The use of the word ‘evasion’ is unfortunate in these situations because it unfairly ascribes a degree of criminality to the individual. Shakira may well simply have been badly advised or, more likely, the Spanish authorities are continuing in their witch hunt of the rich and famous, launching criminal proceedings in an attempt to make examples of them.”
JAVIER DE LA VEGA says:
Interesting view of the current situation in Spain once the Tax Authority has initiated a strategy of investigating wealthy popular people, sometimes with the sole purpose of looking for impact on the popular thinking. The consequence is often violation of privacy, as most of these cases ends really in nothing as were started with little or inconsistent base.
mark@lawtonasia.co.th says:
Many expats have failed to grasp the ramifications of the CRS. Only recently a British citizen who has lived full time in Spain for 14+ years and has substantial offshore assets insisted to me that he was not tax resident in Spain because he did not have a residents permit and paid tax on his pension in UK.
The tax authorities are going to have a field day.
Maria Madrid says:
Spanish residents with overseas assets totaling over €50,000 are required by law to submit “Modelo 720” or face severe penalties. For far too long immigrants (often wealthy) have been living below the radar avoiding/evading paying tax by pretending not to be “resident” in Spain.
Now the Spanish tax authority (Agencia Estatal de Administración Tributaria (AEAT), Agencia Tributaria) is tracking everyone who owns property in Spain (non-resident or resident) and who has not filed a tax return and asking for an explanation. And quite rightly they will prosecute some people – wealthy, famous or just average!
No excuses. There is a huge amount of information on the web which defines “residency” and tax obligations in Spain