“You left me with the mother-in-law as a neighbor with the press at the door and the debt to the Tax Agency,” Shakira sang to Gerard Piqué after their separation. But none of that is real anymore, because the singer left Barcelona and distanced herself from the mother-in-law. And now the National Court has issued a ruling that exonerates her from her famous tax debt and orders the Tax Agency to return 55 million euros to her. These are the key points of the long dispute between the Tax Agency and the Colombian artist:
How much does the Tax Agency have to return to Shakira?
The National Court, in a ruling issued on April 15 that was made public today, annuls the singer’s Personal Income Tax (IRPF) assessment for the year 2011. That assessment amounted to 24,710,636.65 euros (composed of 19,941,432.10 euros in principal and 4,769,204.55 euros in late payment interest). The imposed fine of 24,926,790.13 euros is also annulled. Additionally, the tax debt incurred from the Wealth Tax, which amounted to 2,687,585.16 euros (2,167,915.66 euros principal and 519,669.50 euros in late payment interest), is annulled. The fine imposed on the singer for this tax, which was another 2,709,894.58 euros, is also nullified. Besides the return of these amounts, the ruling establishes that the Tax Agency must pay the corresponding legal interest from the moment the payments were made.
Why had the Tax Agency been wrong in claiming these large amounts from the singer?
Article 9 of the Personal Income Tax Law establishes that taxpayers who remain more than 183 days in Spanish territory during the calendar year are considered tax residents. The first instance court condemned Shakira by considering that she lived in Barcelona for more than 183 days in 2011 and that, consequently, she was a resident in Spain and was obliged to pay taxes in the country.
But the National Court has dismantled that thesis by considering that the artist was not a tax resident in Spain during that year, as she did not stay in the country for the minimum 183 days required by law. Furthermore, the ruling emphasizes that her economic interests and main professional activity were abroad.
How was the number of days Shakira stayed in Spain in 2011 determined?
The Tax Agency concluded that Shakira stayed 163 days in Spain, adding certified and presumed days, while the singer’s defense argued that it was 143 days. Since in no case was the legal threshold of more than 183 days in the calendar year reached, and it was not proven that her core economic or family interests were in Spain in 2011, the National Court concludes that she was not a tax resident in the country during that year and therefore was not obliged to pay taxes in Spain.
What evidence did the artist provide to win the case?
The singer’s defense presented various pieces of evidence and legal arguments that refuted the Tax Administration’s thesis about her residence in Spain. Among this evidence stands out the certificate of residence in the Bahamas, dated September 7, 2016, which proved that the artist had been permanently residing in the Bahamas since 2007. The National Court considers that certificate a relevant “probative indication.”
Additionally, Shakira’s lawyers presented proof of actual stay to determine that the singer was only in Spain for those 143 days in 2011. The artist also managed to prove that she was outside Spain for more than 183 days that year. For the judges, such a prolonged absence cannot be classified as “sporadic,” which breaks the presumption of habitual residence in Spanish territory.
On the other hand, the defense was able to demonstrate the absence of a legal family nucleus in Spain by considering that Shakira had no marital link with a Spanish resident, since a romantic relationship does not legally equate to a marital bond. Furthermore, her minor children did not reside in the country at that time.
It was also proven that the artist’s corporate structure was based outside the national territory and that the majority of her economic activity also took place outside Spain. Thus, by demonstrating that she did not meet the physical presence criterion nor the criterion of having her center of economic or family interests in Spain, the ruling concludes that she did not have her tax domicile in the country during 2011.
How did the relationship with Piqué influence the matter?
In the case related to the 2011 fiscal year, Shakira’s romantic relationship with footballer Gerard Piqué was a central point in the Tax Administration’s argument that led to the singer’s conviction in the first instance. The Tax Inspection maintained that the singer was a tax resident in Spain largely based on the fact that she maintained a “romantic relationship with a resident in Spain,” Piqué. The Tax Agency used this fact to try to justify that a residence transfer had already occurred and thus to add the “sporadic absences” to the count of days spent in the country.
However, the Court has dismantled that argument by differentiating between a romantic relationship and a legal bond and has been very clear in stating that in 2011 there was no “marital bond” of the artist with a resident in Spain. The ruling explicitly clarifies that a romantic relationship “cannot legally be equated to a marital bond” for the purposes of determining habitual residence.
Thus, the ruling concludes that there was no family nucleus. The law presumes residence in Spain if the spouse and minor children habitually reside in the country, but since there was no marriage nor were there minor children of the appellant residing in Spain that year, the existence of a “family nucleus” for legal purposes in Spanish territory during 2011 could not be proven. Since the legal requirements of the family bond and the physical presence criterion of more than 183 days were not met, the Court determines that Shakira’s relationship with Piqué was not sufficient proof to declare her a tax resident in Spain.
Finally, the ruling emphasizes that circumstances may have changed in later years, between 2012 and 2014, but for the 2011 fiscal year, the Tax Administration’s thesis has not been proven.
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