Internationally Renowned Singer, Shakira, Settles $15 Million Spanish Tax Fraud Case
In this world, nothing can be said to be certain except death and taxes, Benjamin Franklin famously remarked. With U.S. tax season coming up, global best-selling artist Shakira's recent brush with the Spanish tax authorities might serve as a cautionary tale.
On November 20, 2023, the Colombian songstress, well-known for hits such as "Whenever, Wherever" and "Hips Don't Lie," settled tax fraud charges against her in Barcelona, Spain to the tune (pun intended) of $15.74 million (14.5 million euros).
The Importance of When and Where
Spanish prosecutors had accused Shakira of not paying income tax between 2012-2014, when they alleged the beloved Latin singer, who recently split from her partner, successful FC Barcelona defender Gerard Piqué, resided in Spain. Shakira Isabel Mebarak Ripoll, to use her full name, was facing the prospect of eight years in prison, and a fine of 23.8 million euros (more than $26 million) if found guilty. Striking a deal on the first day of trial, the Associated Press reports that Shakira agreed to a fine of 7.3 million euros ($8 million), which was 50% of the amount allegedly owed, as well as the payment of unpaid taxes and interest. She also accepted a three-year suspended sentence and a further fine of 438,000 euros (approximately $479,000).
The crux of the charges was Shakira's actual residence for tax purposes between 2012 and 2014. The Spanish authorities asserted that she had spent more than six months of each of those years in Spain and was therefore "ordinarily resident" in the country and liable to pay income tax. They cited a property that Shakira bought in Barcelona in May 2012 as evidence of this, claiming it was her family home. However, Shakira has insisted that the lion's share of her income during that period was made from international tours which required her to spend prolonged periods outside Spain. After these tours, in 2015, she declared Spain to be her place of residence for tax purposes.
Her Lips Don't Lie
Although she accepted the charges against her as part of the settlement, Shakira maintains her innocence. The "Queen of Latin Music" explained to the media that her decision to settle was motivated by a desire to avoid stress and the inevitable emotional toll on her and her family, which includes two young sons she had with Piqué, aged 9 and 7. The prolific singer-songwriter had rejected an earlier deal offered to her by the prosecution and opted to go to trial.
Shakira was facing six counts of income tax fraud, with the Spanish tax authorities claiming that she had attempted to dodge tax by hiding assets and revenue under an intricate international "corporate framework" consisting of companies as far and wide as the U.S., Cayman Islands, BVI, Panama, Malta, and Luxembourg. Shakira has moved around quite a lot during her career and previously lived in the Bahamas and is said to have moved to Miami after her split from Piqué. In fact, she had listed the Bahamas, a recognized tax haven, as her place of residence during the years in dispute, namely from 2012 to 2014.
Shakira has publicly criticized Spanish tax agencies for deliberately targeting high-income and high-profile individuals (although Spain is certainly not the only government to have been accused of this). She's also not the first celebrity to have come under the scrutiny of the Spanish tax authorities. Household names such as Portuguese superstar footballer Cristiano Ronaldo and Argentinian legend Lionel Messi have similarly settled Spanish tax disputes and paid hefty fines. Shakira emphasizes that she sought counsel from leading tax advisers, including eminent players such as PWC and Ernst & Young in managing her worldwide tax affairs.
Certain commentators have referred to Shakira's recent legal battle as a warning to remote workers, given the recent surge in popularity of the so-called "digital nomad," particularly since the COVID-19 pandemic. It should be remembered that U.S. citizens are liable to pay U.S. taxes, irrespective of the source of income — although in some cases, double-taxation treaties may apply.
So, just a caveat to those preparing their tax returns for 2023 — even if you probably haven't raked in as many Benjamins as the great Shakira, great caution and attention to detail are required. A taxing process no doubt.
- Tax Law (FindLaw's Learn About the Law)
- Tax Evasion and Tax Fraud (FindLaw's Learn About the Law)
- Shakira's Ex-Boyfriend Seeks $100M for Making Her Famous (FindLaw's Blog Archive)
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