Justice once again agrees with the Treasury in the inspections and sanctions that it has open against Miguel Bosé. The Superior Court of Justice of Madrid, in a ruling of March 18, dismisses the singer’s appeal against the decision of the Treasury and endorses two settlement agreements proposed by the Inspection on corporate tax in 2010 and 2011. The Administration considers that the famous singer and old acquaintance of the Tax Agency – left the Tax Agency in 2019 list of defaulters of the Treasury after paying part of his debt— he lowered his tax bill through a corporate network: personal expenses were deducted —among them, the purchase of acorn-fed Iberian hams and loins— and collected from a company of which he was “Sole administrator” for services that had to be declared as income in personal income tax and that were not adjusted to market prices. Bosé used a tax architecture similar to that used by various athletes to pay less to the treasury.
Bosé, to whom the ruling refers to the pseudonym of Don Lucas, appealed a decision of the Regional Administrative Economic Court (TEAR) of Madrid of May 2019. The Treasury considered that the artist was the joint and sole administrator of Costaguana, a company that paid the singer for the services he provided. The firm had a turnover of 4.5 million in 2010 and 1.7 million in 2011. Revenues that, according to the inspection, were related “to activities whose essential content was the intervention of Lucas.” However, there is a mismatch between these figures and what was declared by Bosé in personal income tax.
The artist declared income of 509,420 euros and 195,106 euros in 2010 and 2011 for the economic activity received from this company. Some amounts, according to the Treasury, “notably lower than those obtained by the company for said services in the same years.”
The Treasury recalls that it is legal to create companies to develop professional activity, but adds that “what is really controversial” is how the remuneration for the services that a partner is set “provides the company that it owns in its entirety.” In other words, it concludes that Bosé used the company to increase income subject to corporation tax —with rates lower than personal income tax— and lower the tax base in income tax.
The Treasury raises the tax bases of the singer’s personal income tax by 909,377 euros in 2010 and 266,142 in 2011. And it reduces the corporate tax base by calculating that the market value of the services provided by Bosé had to be higher than the subscriber.
The defense, for its part, alleges that the singer billed this company a monthly amount “for the organization of the performances for which he was hired”, and that this was adjusted to market prices. In addition, it considers that it is “disproportionate the allocation of 100% of the benefit of the artist’s activity, since he had the material and human means to carry out his activity.”
The treasury also considers that several of the expenses declared by the company were not deductible, since they were personal. A decision that the court supports and that is linked to another ruling published by this newspaper on expenses unduly deducted in VAT. In 2010 and 2011, the company deducted non-deductible invoices for 137,208 and 166,894 euros. Among them, physiotherapy treatments and physical training, a “closed circuit domotic television” or the renting of an Audi. There are also invoices for the repair of two cars and the purchase of “Iberian products”, such as hams and loins. “Apart from the fact that the expenses of representation and gifts are not deductible, there is no evidence of any relationship of these expenses with the income of the company,” says the ruling.
The Treasury points out that it has encountered a “network of companies”, and that it has discovered “significant inflows and outflows of capital, coming from Luxembourg and bound for the United States.” “All this highlights that we are faced with a network of companies at the service of a lower taxation to avoid the partner’s taxation for the income tax of natural persons,” concludes the court.
“The plaintiff company did not carry out any professional activity and it was carried out by its partner Mr. Lucas, since all the contracts made by it were aimed at the development of Mr. Lucas’s professional activity and were carried out exclusively in function of that activity, in such a way that the activity could have been carried out directly by the individual, without the need for a company to do so ”, he adds. For this reason, the Court considers it “perfectly appropriate” to charge Bosé in personal income tax 100% of the company’s income, “since there would have been no regularization if there had been a remuneration from the company to the partner at market value”.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.