A second investigation into the Grammy-winning Colombian singer Shakira for alleged tax fraud has been initiated by a judge in Barcelona. According to a press statement from the Spanish court, the new investigation involves two alleged counts of tax fraud in 2018.
The latest probe in a tax case that offers lessons for people living abroad comes as Shakira, who is known for hits including "Whenever, Wherever" and "Hips Don't Lie," is already awaiting a Spanish trial for allegations of tax evasion amounting to about $16 million from 2012, 2013, and 2014.
- The singer has denied the charges and, without admitting wrongdoing, reportedly already paid millions of dollars to settle a portion of the alleged tax debt.
- However, Spanish officials have said their investigation produced enough evidence to warrant a trial.
Shakira, originally from Colombia but now residing in Miami, says that she followed the advice of tax professionals and complied with the law. Her legal team is reportedly awaiting formal notification of the new investigation, but prosecutors in the initial tax case are seeking up to eight years in prison.
In the meantime, this case highlights the impact residency and living abroad, even temporarily, can have on an individual's tax liability — even when you’re not a pop star.
Residency 183-Day Rule: Do You Pay Taxes if You Live Abroad?
- According to Spanish tax authorities, Shakira resided in Spain for over 200 days annually from 2012 to 2014, making her liable to pay taxes there.
- If you spend more than 183 days in Spain during a calendar year, you're considered to be a resident of the country for tax purposes.
Spain isn’t the only country that uses the “183-day rule” to determine whether you are a “resident” for tax purposes. (The 183-day rule generally says that if you spent 183 days or more in a country during a year you are considered a tax resident of that country for that year.) Different countries use different criteria to figure out whether a person living there should be taxed as a resident.
For example, the United States has “tests” (a "green card test" and a "substantial presence test") for determining tax residency status. The calculations can be confusing because the substantial presence formula has a 31-day component, a 183-day component spread over three years, and numerous exceptions.
Some U.S. states also have residency requirements based on the 183-day rule. But each state varies in terms of how it calculates the time you spend there and how that time factors into whether you have to pay that state's income taxes. For example, establishing residency for tax purposes in Florida, a state with no income tax, may not be as easy as you expect. (Residency and taxes can be a factor when you live in one state and work in another.)
Taxes for U.S. Citizens Living Abroad
As for U.S. citizens and "resident aliens" (the IRS term for non-U.S. citizens who meet either the green card or substantial presence tests), the IRS says your worldwide income is subject to U.S. income tax — no matter where you live. However, some tax breaks are available to taxpayers that qualify, like the foreign earned income exclusion and foreign income tax credits.
If you’re living abroad and are unsure about your tax liability, consult a trusted professional tax or financial advisor before tax season. You can also visit the IRS page on resident and non-resident tax status to learn more. In any case, you don’t want to be caught off guard by a tax bill you can’t shake.
