In a flurry of tax evasion rulings, Spain has levied substantial back taxes and penalties on high net worth celebrities, including footballers Cristiano Ronaldo and Lionel Messi and singer Shakira.1
Early this summer, Cristiano Ronaldo chose to leave Spain and moved to Italy amid speculation that tax penalties were a motive. Ronaldo was fined €18.8 million for tax evasion. Similar to Messi, he was found to be using offshore entities to conceal earnings from image rights. In early May 2017, Lionel Messi and his father were convicted of tax fraud and were forced to pay €4.4 million for unreported income. According to Spanish authorities, Messi and his father used Belizean and Uruguayan entities to conceal earnings from image rights.
Colombian singer Shakira, was also ordered to pay more than €20 million in back taxes to Spain. According to news outlets, she owns a home in the Bahamas and claimed the Bahamas as her tax residence in 2011 through 2014. Spanish authorities prevailed in treating Shakira as a Spanish resident for those years.
In addition to back tax and penalties, the soccer players were sentenced to incarceration, but neither is actually expected to serve time in prison. In Spain, first-time offenders who are sentenced to less than two years can serve the time under probation.
Ronaldo and Messi are not the only soccer players in hot water with Spanish authorities; according to Forbes,2 Filipe Luis, Diego Costa, Radamel Falcao, and others have been involved in tax disputes with Spanish authorities.
After the hefty penalty, it is not surprising Ronaldo chose to leave Spain. It is anticipated that even with less pay in Italy, Ronaldo will retain a higher net income than when he was in Spain (Ronaldo's deal is worth a reported U.S. $117 million).
In 2017, Italy introduced a new law intended to encourage individuals to move to Italy.3 This measure has become a useful tool to attract high net worth individuals. Under the law, Italy offers a resident non-domiciled tax regime to wealthy individuals that allows them to pay ordinary taxes on the income generated in Italy and a single, fixed tax payment of €100,000 to cover taxes on non-Italian-source income.
Ultimately, the new Italian law may benefit the country's budget as well as its sports teams by enabling them to attract other foreign star players.
1 See "Updates and Other Tidbits," Insights 5, no. 3 (2018).
2 Kelly Phillips Erb, "8 Soccer Players At the World Cup Who Have Been Caught Up in Tax Scandals," Forbes (June 28, 2018).
3 "Italy Introduces a 15-Year Preferential Tax Regime for Wealthy Individuals Taking Up Tax Residence In Italy," Insights 4, no. 2 (2017).
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