Shakira wins Spanish tax battle: High Court orders €55 million refund

The court rejected the state tax agency's arguments, ruled that the Colombian singer was not a tax resident in Spain at the time, and ordered the authorities to refund the taxes paid, plus interest and court costs.

While the amount under dispute in this appeal was set at €55,034,906.52, the singer's legal team maintains that the total returned should be closer to €60 million. Although the Spanish tax authorities can still appeal the decision to the Supreme Court, the ruling marks a significant victory for the star.

For now, however, this ruling marks the end of an eight-year battle between the Colombian artist and the Spanish tax agency over income tax earned during some of her most lucrative years. Shakira admitted to tax offences from 2012 to 2014, but objected to being taxed for 2011, one of her most successful years that was mostly spent outside Spain.

The court annulled the decision of the previous court ruling from July 2021 and, with it, the tax assessments and penalties levied for personal income tax (IRPF) and wealth tax related to 2011.

The heart of the ruling is about proving tax residence. The High Court pointed out that article 9.1 of the law on personal income tax in Spain requires, in order for an individual to be considered tax resident in Spain, that he or she spend more than 183 days during the calendar year in Spanish territory or that the main core of his or her activities or economic interests be based here. The court concluded that neither of these two circumstances was established in Shakira's case.

The judges were thorough when analysing how the days were calculated. The tax agency argued that the singer had physically stayed in Spain for 163 days, while Shakira's defence argued that it had only been 143 days.

Even if the tax agency's calculation were accurate, the number still did not reach the legal threshold. "The tax agency has not proven that the appellant stayed in Spain, under the terms required by article 9.1 of Law 35/2006, for more than 183 days," stated the ruling. The stay, therefore, was only 163 days "between certified and presumed days".

The court also dismantled the theory of sporadic absences, the method used by the Spanish tax authorities to add certain periods spent outside the country to the time spent in Spain. The ruling underlined that "sporadic is only sporadic when it occurs occasionally or in isolation and for necessarily short periods of time". It further ruled that a prolonged absence cannot be classified as occasional. "It cannot be considered an occasional or sporadic absence when it is prolonged, lasting, for a period of more than 183 days", argued the court.

The judges went further, warning that accepting this interpretation would empty the legal rule surrounding residence of all its content. "If this were to be accepted, the concept of habitual residence, which in turn is based on the concept of permanence in Spain, would be completely devoid of meaning and reason," stated the ruling. In the case of Shakira, the judges took the evidence as confirmed that the artist was outside Spain for more than 183 days in 2011, a state of play that the tax agency itself did not dispute.

The ruling also downplayed the debate about the Bahamas, where the singer claimed she was fiscally resident. The tax authorities had extensively analysed whether that residence was real and whether the certificate provided was relevant.

However, the National High Court shifted its take on this matter: "What is essential, and what the tax authorities must prove, is whether the appellant was tax resident in Spain." It added that, "Whether or not the Bahamas was a tax haven in 2011 is irrelevant, because the appellant has proved that she spent at least 183 days outside Spain."

The tax agency's other main argument - Spain being Shakira's alleged centre of economic interests - was also unsuccessful. The ruling concluded that the tax authorities did not prove that the artist's economic activity was based in Spain. "Nor is it accredited that the main nucleus or base of her activities or economic interests, either directly or indirectly, is based in Spain," the ruling stated. "On the contrary, the business network attributed to the plaintiff is based outside national territory", as is "the majority of her economic activity".

The year analysed dates back to 2011, a year in which Shakira went on a world tour, totalling 120 concerts across 37 countries. At that time, the singer had no home in Spain, no children in the country and did not concentrate her professional or business activities here. The court also noted that in that year there was no marital relationship with a resident of Spain and no underage children resident in Spanish territory. "There was no core family for the legal purposes of a foreign person", stated the ruling.

That nuance is key because the tax agency had flagged Shakira's 'sentimental relationship' with a resident of Spain to claim that a transfer of residence had already taken place. The court rejected this suggestion. "The tax authorities' assertion is that there was a sentimental relationship with a Spanish resident, which cannot be legally equated to a marital relationship," stated the ruling. For this reason, the court also ruled out the legal presumption of residence based on the family nucleus.

The judgment insisted that the proceedings were confined exclusively to the 2011 financial year and that any changes that occurred in subsequent years do not affect this case. "We are examining the 2011 financial year", stressed the court, so that subsequent situations, from 2012 to 2014, "do not affect the present appeal". In those years, the court noted, there may have been events that affected the singer's tax residence in Spain, but they should not be automatically projected onto the year under scrutiny.

The High Court's conclusion is categorical: since it has not been proven that Shakira domiciled for tax purposes in Spain in 2011, the tax assessments and penalties applied are not sustainable. "It is obvious that the tax assessments in question and the resulting penalties are unlawful," stated the ruling. The appeal was upheld, which means that the action taken against Shakira is null and void and the amounts paid are to be refunded, with interest as required by law. The court also ordered the Treasury to pay court costs.

With this ruling, Shakira closes her last battle front with the Spanish tax agency. The singer left Spain at the beginning of 2023 to settle down with her children in Miami, after years of public exposure and tax litigation.