Spain’s former king Juan Carlos I makes second payment in a bid to regularize his tax affairs

Spain’s emeritus king Juan Carlos I has made a second payment to the country’s Tax Agency in a bid to regularize his fiscal situation after he received undeclared income over a number of years. The former monarch, who abdicated from the throne in 2014 and has been mired by accusations of wrongdoing regarding his finances in recent years, has handed over more than €4 million to the tax authorities to cover up to €8 million he received in payments in kind, sources with knowledge of the situation have told EL PAÍS.

Amid the investigations into his financial affairs last year, Juan Carlos I – who is the father of the current king, Felipe VI – opted to leave Spain and has been living in the United Arab Emirates since the summer. In December 2020, he made a first payment to the Tax Agency of €678,393 to pay off a debt that corresponded to the tax years of 2016 to 2018 – after he abdicated the throne, he lost the full immunity from prosecution that he had enjoyed up until that point. When he made this payment, he was admitting that he had committed fraud, but by regularizing the outstanding amount before being informed of the opening of an official probe he avoided facing the courts for the offenses.

This voluntary declaration of €8 million relates to flights from a private jet company that he used and that were paid for until 2018 by a foundation called Zagatka, owned by his distant cousin Álvaro de Orleans, sources close to the case have told EL PAÍS. The use of these flights is considered to be a payment in kind and is subject to income tax (known as IRPF) in Spain.

The Zagatka foundation was created in Liechtenstein on October 1, 2003. Its main beneficiary is Orleans, a 73-year-old engineer and entrepreneur. According to the foundation’s statutes, it was created to help the then-king of Spain in recognition of his contribution to democracy in Spain. Juan Carlos I played a key role in the Transition, when Spanish society moved from the end of the dictatorship of Francisco Franco to a full democracy in the late 1970s. The second beneficiary of the foundation was a son of De Orleans, followed by Juan Carlos I and then Felipe VI, in the case of the death of the Orleans. In fifth place were Juan Carlos’s daughters, Elena and Cristina de Borbón.

In June, the foundation modified its statutes and removed Juan Carlos I and his three children as beneficiaries. Since then, the only listed beneficiaries of the funds are Álvaro de Orleans and his son, Andrés. The statutes state its objective is “guaranteeing the financial support of the family of the founder.” In March of last year, the accounts of Zagatka contained around €10 million, according to Orleans.

“I’ve paid for a lot of flights for the emeritus king, but I am not his front man,” Álvaro de Orleans told EL PAÍS in February 2020, during an interview in Geneva. The cousin and friend of the former king said that he had done so in order to protect the private life of Juan Carlos I and to continue the Orleans family tradition of helping the Spanish monarchy.

Contacts with the Tax Agency

Javier Sánchez Junco, a lawyer for Juan Carlos I, has been in contact with the Spanish Finance Ministry in order to arrange this latest regularization of the emeritus king’s tax affairs, which had been under consideration for months but had not been executed until now. The delay was due to the difficulty that the former monarch had in raising the multi-million amount that he had to hand over. Juan Carlos I must be able to prove the origin of the money that he has paid to the tax office.

The defrauded amount that Juan Carlos I is admitting to now is much greater than the sum that he regularized last December, as well as greatly exceeding the annual €120,000 limit considered to be a tax crime under Spanish law.

The relevant legislation states that any taxpayer can avoid being accused of fiscal offenses if they pay off their debts before the Tax Office or the justice system notify the person in question of the start of an official investigation.

The same article in the Criminal Code states that the regularization must be “comprehensive and accurate” before the king can be exonerated of any possible tax offenses. The fact that a second regularization has been made throws into doubt whether the first was complete, but the response will depend on the outcome of an analysis as to whether they cover the same fiscal years or indeed the same items.

The Supreme Court prosecutor is still analyzing whether the regularization that the former monarch made two-and-a-half months ago is accurate. The payment of €678,393 was made by the king’s lawyer, Javier Sánchez-Junco. The sum was to regularize the hidden funds that were paid to him between 2016 and 2018 by the Mexican entrepreneur Allen Sanginés-Krause, who had interests in Spain. The corruption prosecutor, which was already investigating these funds but had not notified Juan Carlos I, questioned the businessman himself and Nicolás Murga Mendoza, a colonel in the air force and an aide de camp for Juan Carlos I for more than a decade, and who allegedly acted as his front man.

According to the prosecutor’s investigation, the credit cards paid for by Sanginés-Krause served to cover a range of costs for the emeritus king and his family members (not including King Felipe VI and his wife Queen Letizia), including trips, gifts, hotel stays and restaurants.

Three investigations

A team of four prosecutors is currently investigating Juan Carlos for three different affairs. Firstly, he is alleged to have received illegal commissions when the contract to build the high-speed AVE train link to Mecca was awarded to a Spanish consortium for €6.5 billion. Secondly, the receipt of the aforementioned funds from Allen Sanginés-Krause. And Thirdly, the alleged possession of accounts in tax havens that counted on millions in funds.

The emeritus king’s legal team is confident that the first case will be shelved because at the time of the allegations he was still the reigning monarch, and as such had total immunity from prosecution. They believe that the second case will come to nothing, given that the debt has been regularized. And in the third case, Juan Carlos is denying the existence of such accounts. None of these cases is yet to be shelved, but the prosecutor is yet to file a case at the Supreme Court, where the emeritus king still enjoys immunity.

This new regularization has come to light in the same week when Juan Carlos I was notably absent at a ceremony to commemorate the 40th anniversary of an attempted coup d’état in Spain. At the event in the Congress of Deputies, which was stormed on February 23, 1981, by a group of armed civil guards, Felipe VI paid tribute to his father’s role in the events of that night. Juan Carlos’s appearance on television that night to make a statement contributed to the failure of the attempted uprising. The current king’s comments at the ceremony were significant given that it marked the first time he had expressly mentioned his father since the ongoing scandal came to a head in March of last year, when Felipe announced that he would renounce any inheritance from his father and was also canceling his yearly stipend paid out by the Royal Household.

On August 3, when Juan Carlos left Spain headed for Abu Dhabi, his lawyer, Javier Sánchez-Junco, sent out a statement in which he said that his client would be “at the disposition of the fiscal ministry for any formality or action that they deem appropriate,” making clear that under no circumstance was the emeritus king trying to evade the Spanish justice system.

Juan Carlos I still enjoys a level of immunity from the Supreme Court under a legal reform that was approved in June 2014, after his abdication. Only a Supreme Court judge can call him to appear as a suspect, once the corresponding lawsuit has been presented and accepted by the court. However, according to legal sources, the public prosecutor could offer him the possibility of making a voluntary statement, in order to establish the origin of the funds he is seeking to regularize. This would allow for his return to Spain to be expedited.

The former king’s fall from grace

A once-revered figure in Spain, emeritus king Juan Carlos I ran into problems back in 2012 after it emerged that he had suffered a fall during an elephant-hunting trip in Botswana. He was taken to Madrid for an emergency hip operation after the incident, which happened when he was aged 74.

He was widely criticized at the time for taking the vacation, in the company of his then-lover Corinna Larsen, at a time when Spain was still reeling from the effects of the global financial crisis that began in 2008. The trip to hunt elephants cost more than €40,000 and had been paid for by Mohammed Eyad Kayali, an advisor to the Saudi royal family who was named in the 2016 Panama Papers scandal as the head of 15 offshore companies.

Juan Carlos made a public apology after the incident, stating to television cameras: “I’m very sorry. I have made a mistake and it will not happen again.” But opinion polls revealed that public support for the monarch had fallen in the wake of the incident.

In a bid to save the image of the institution, Juan Carlos ceded the throne to his son in 2014. But the Spanish Royal Family’s problems continued to pile up, with the emeritus king’s son-in-law Iñaki Urdangarin and daughter Cristina facing charges in a corruption case dubbed “Nóos,” after the non-profit institute the former ran in the Balearic Islands. While Cristina escaped punishment, Urdangarin ended up in prison for embezzlement, among other charges. He is still serving his sentence.

It later emerged that Juan Carlos transferred €65 million to Larsen, who also goes by her ex-husband’s surname, referring to herself as Corinna zu Sayn-Wittgenstein. Her lawyer said that the sum was a “gift” that she had “not requested from the emeritus king.”

There were also accusations that Juan Carlos had bank accounts in Switzerland, and that a foundation of his in Panama had named Felipe VI as a beneficiary. This final revelation was what prompted Felipe VI to renounce the inheritance from his father last March, and strip Juan Carlos of his yearly stipend of nearly €200,000.

With reporting by Natalia Junquera.

English version by Simon Hunter.