The Shakira case: key considerations for tax residence in highly mobile international contexts

Tax residence in contexts of high international mobility continues to raise significant practical controversies. Professionals who work in multiple countries, with stays spread out throughout the year, frequently face a critical question: how are days spent in a country and days spent traveling calculated when there is no clear residence in any single jurisdiction?

A recent ruling by the National Court (the Shakira case) addresses precisely this problem and sets relevant limits on the use of so-called sporadic absences.

The case pertains exclusively to the 2011 tax year and stems from a very specific question: whether the artist should be taxed in Spain as a tax resident or, as she argued, whether her residence was outside Spain, in the Bahamas. The distinction was significant because Spanish tax residence meant she would be taxed in Spain on her entire worldwide income and assets.

It is important to distinguish this matter from the high-profile criminal proceeding concerning the 2012, 2013, and 2014 tax years, which concluded in November 2023 with a settlement agreement. The ruling we are discussing here pertains solely to the year 2011 and resolves an appeal against the assessments and penalties imposed for personal income tax and wealth tax for that year.

In this case, the National Court upheld the appeal and annulled the tax assessment. However, what is most significant is not only the outcome but the reasoning followed by the Chamber, which places a significant limit on the expansive use of so-called sporadic absences to establish tax residence in Spain.

A difficult-to-sustain administrative position

Before delving into the specific case, it is worth recalling the general rule established in Article 9 of the Personal Income Tax Law. Tax residence in Spain may be determined by staying for more than 183 days on Spanish territory, by the location in Spain of the basis of the activity or economic interests, or, in certain cases, by the residence in Spain of the spouse and dependent minor children.

However, regarding the criterion of stay and the calculation of days spent in Spain, the Spanish tax authorities faced an obvious difficulty: how to calculate the stay in Spain in situations of high international mobility, where the taxpayer does not exceed 183 days in any single country.

Thus, the Spanish tax authorities had been unable to establish more than 183 days of presence in Spain, even when adding the so-called documented days and presumed days. According to their own calculation, the stay on Spanish territory totaled 163 days, a figure below the legal threshold.

Added to this was the debate over tax residence in the Bahamas. The Spanish Tax Authorities questioned the validity of the foreign tax residence certificate provided by the singer’s defense, but that debate alone did not resolve the main issue, which was determining whether the requirements were met to establish that the singer had tax residence in Spain during 2011.

The romantic relationship with a person residing in Spain was also used as a connecting criterion. However, that argument had very limited scope since it involved a non-marital relationship.

Finally, the Spanish Tax Authorities sought to support its position by focusing on the location of the economic interests. Here, too, the position was complex, because it was not enough to assert a connection to Spain; rather, it was necessary to maintain that the principal center or base of economic activities or interests was effectively located in Spanish territory.

The National Court limits the sum of sporadic absences

Within the criterion of presence, the Personal Income Tax Law incorporates an additional rule of particular relevance, which is the one the Spanish tax authorities attempted to apply to defend their interests. Thus, to calculate the number of days spent in Spain, not only are days of physical presence taken into account, but also so-called sporadic absences—temporary or occasional trips abroad that do not break the habitual residence in Spain, unless the taxpayer proves tax residence in another country.

The purpose of this rule is to prevent a person who habitually lives in Spain from ceasing to be a tax resident due to brief or occasional trips abroad. The problem arises when this provision is used not to confirm an already existing habitual residence, but to attempt to reach the 183-day threshold that has not been proven through days of actual or presumed presence

This situation is not exceptional. It is common among individuals with high international mobility (athletes, content creators, executives, or expatriate professionals) who carry out their activities in several countries without exceeding the 183-day threshold in any of them.

As we have stated, the Spanish Tax Authorities, counting both proven and presumed days, concluded that Shakira had remained in Spain for 163 days. To reach the 183-day threshold, the Spanish Tax Authorities considered that certain periods spent outside Spain should be added, treating them as sporadic absences.

The National Court rejects this interpretation. In the Court’s view, a prolonged absence (even if in multiple countries) exceeding 183 days outside Spain cannot be classified as sporadic without rendering the concept of habitual residence meaningless.

In other words, sporadic absences may serve to reinforce an already established Spanish residence, but not to artificially inflate a count of days that falls short of the legal threshold, which calls into question many of the criteria applied by the tax authorities to date.

Challenging a Tax Residence Certificate Is Not Enough

Another interesting aspect of the ruling is that it also introduces an important nuance: the obligation on the part of the Spanish Tax Authorities to prove residence in Spain, such that if it is unable to do so, its claims cannot succeed.

On this point, the Court is clear. The fact that residence abroad may be disputable does not, in and of itself, allow for the assertion of tax residence in Spain. That conclusion requires meeting the criteria established by law, whether it be a stay exceeding 183 days, the center of economic interests, or family ties in the strict sense.

Romantic Relationship and Economic Interests

Finally, the ruling also analyzes two other elements, although they are less novel.

First, the National Court rejects the notion that a romantic relationship with a person residing in Spain can be equated with the family unit provided for in the Personal Income Tax Law. The legal presumption refers to a spouse who is not legally separated and to dependent minor children. In 2011, there was no marital relationship nor were there any minor children residing in Spain, so that presumption could not apply.

Second, the Court also does not consider it proven that the artist’s principal center or the basis of her economic activities or economic interests was in Spain. On the contrary, it highlights that the corporate structure attributed to the appellant was based outside the national territory and that the majority of her economic activity also took place outside Spain.

A significant ruling, but not yet established case law

It is advisable, however, to exercise caution. This is a single ruling by the National Court, and it will be necessary to confirm whether this criterion is consolidated in future rulings, particularly by the Supreme Court.

Nevertheless, the ruling has undeniable practical value: it reinforces the idea that tax residence in Spain cannot be established through broad interpretations or insufficiently supported assumptions, but rather requires a strict application of legal criteria and a sufficient evidentiary basis.