If you thought that the data leak “Panama Papers” was the only scandal that has shaken the world in terms of taxes, then brace yourself, in this installment we will talk about a case that is a real Waka Waka of Taxes! And yes, we are referring to Shakira vs. the Spanish Tax Agency.

For many, the case of Shakira sounds complicated, as it involves a torrid romance that began in the 2010 World Cup and led to the Spanish courts for the commission of the crime of tax evasion of 15.8 million dollars in taxes generated between 2012 and 2014, whose outcome was finally in 2023, but for a better understanding of the issue, it is necessary to understand the scenario where the plot unfolded:

Shakira, a successful Colombian singer, failed to declare taxes in Spain for several years, as she maintained that her fiscal residence was in the Bahamas, a place where tax rates are much lower than in Spain. Her strategy also involved managing income through shell companies with no real operations, but what the singer did not anticipate was that an inspector from the Spanish tax authority would be following her steps. According to the article by Jesús García published in the newspaper El País on August 29, 2020, it was known that the singer in Barcelona “received private French lessons, that her Zumba teacher was named Betsie, that she went to the hairdresser twice a week, that her expenses at El Corte Inglés, restaurants, and hotels were paid by her assistants with American Express credit cards”, among other details of Shakira’s day-to-day life, which led the prosecution in Barcelona to argue that the artist was a fiscal resident in Spain and should have paid taxes on her global income in the country.

Up to this point, you might be wondering how Shakira’s residence is related to tax evasion and the exchange of tax information. This connection led to a scandal of millionaire proportions that even became part of the lyrics of one of the singer’s musical hits. In that song, Shakira complains to her ex-partner: “You left me with the mother-in-law as a neighbor, the press at the door, and the debt with the Treasury.”

Now, let’s delve into some technical aspects that might seem exclusive to tax experts, but are actually much simpler than you think. Therefore, we will explain each of them in detail:

First, let’s talk about the concept of Tax Evasion.,In Panama, the law conceives tax evasion as a behavior punishable through administrative means, consisting of committing deliberate actions or omissions to minimize, eliminate, or delay the fulfillment and payment of taxes managed by the General Directorate of Revenues. This applies to amounts less than US$300,000.00 excluding fines, surcharges, and interest in a fiscal period (one year). However, if the amount of the offense exceeds this figure, it would then be classified as Tax Fraud, a criminal behavior that carries penalties of 2 to 4 years in prison. In Spain, Tax Evasion is an offense that has a more complex regulation and much more severe penalties.

Another technical aspect to consider is Fiscal Residency. It’s important to highlight that the connotation of Fiscal Residency varies between Panama and Spain, so we will take a look at the foreign regulation. Given this, the tax code of Spain stipulates that any individual who stays in said country for a period equal to or greater than 183 days in a given year is obligated to pay taxes in that country. However, in the case of the singer, she claimed to have had her fiscal residency in the Bahamas between 2012 and 2014, which exempted her from paying taxes to the Spanish treasury on the income generated during that period.

Now, how does the Exchange of Information come into play in this case? The exchange of information might seem like just another procedure in the daily operations of any financial institution, but its relevance goes beyond because, in the case of public figures like Shakira, this exchange turned out to be the key that unlocks the mystery behind her alleged tax evasion. The connection between banking data from multiple countries and tax declarations was fundamental in tracing her international financial pattern. So, if Shakira had her financial affairs spread across several countries, the Spanish authorities could obtain details of those movements, and indeed they did!

In the end, this intriguing case, worthy of a detective plot, had an unexpected outcome: Shakira would face a sentence of three years in prison and a fine of 7.6 million dollars. However, the trial, which was anticipated to be long and with more than 100 witnesses, was resolved in just eight minutes. ¿The reason? The singer admitted her guilt and agreed to pay the fine, not forgetting that in previous years she had already paid the Spanish tax authorities the sum of 18.8 million dollars, plus the corresponding interest for late payment.

This episode only highlights the importance of information sharing, which turned out to be the master key that unraveled a complicated financial scheme. This underscores its fundamental role in the fight against tax evasion and in promoting transparency in the financial sphere worldwide.

Note: For more information write to jmitre@lacgrp.com / ibonilla@lacgrp.com


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