How Shakira used Malta companies to avoid high-tax jurisdictions

Colombian singer Shakira is facing six charges linked to tax crimes following a year-long investigation by Spanish authorities who argue her crimes were aggravated through the use of companies in Malta and other low-tax jurisdictions.

Following the exposure of her offshore business empire in 2017 through the Paradise Papers investigation, the chart-topping musician has been in hot water with Spanish prosecutors.

She is being accused of using a network of 14 offshore companies to avoid tax to the tune of €14.5 million, and is facing a €23.3 million fine and a possible eight-year jail term.

One of the companies forming part of Shakira’s offshore business empire was Tournesol Ltd, a Malta-registered company used as the official rights-holder of her musical assets, which were valued at around €32 million. The company was registered in 2007 and remains active.

Shakira was in an 11-year relationship with Spanish footballer Gerard Piqué, with whom she had bought a property in Barcelona. Spanish authorities specifically homed in on tax payments which they claim are due from the years 2012 to 2014.

While Spanish tax inspectors are insisting that Shakira was in fact residing in Spain for enough time to qualify as a resident for tax purposes, the singer denies this was the case and cites international commitments as the main reason for her offshore network, and that she resided in the Bahamas during the years in question.

Malta’s tax regime is highly accommodating to companies with no physical presence in the country but are nonetheless registered here.

An EU Tax Observatory report published in September of last year shows that Malta is one of 17 tax havens across the world in which Europe’s 36 largest banks book billions in shareholder profits so as to skim off taxes they would otherwise have to cough up in other, higher-tax jurisdictions.

The report’s conclusions outline how if all 17 tax havens were subject to a harmonised 15% tax rate across the board, banks would be contributing at least an additional €3 billion every year in taxes owed to the countries in which those profits were made.

In December last year, the EU Commission proposed a directive that would ensure a 15% minimum corporate tax rate across all EU member states, a directive which all Maltese MEPs flatly voted against when it was first proposed.

The directive remains dead in the water for the time being following Hungary’s opposition to the minimum corporate tax rate. According to EU rules, the Council of Europe, on which the EU’s 27 leaders sit, need to unanimously agree to its implementation before any such directive can be approved and enforced.