Abramovich receives 10 year tax exemption in Israel

Roman Abramovich

Roman Abramovich is the latest billionaire to immigrate to Israel and receive a 10-year exemption from tax and reporting to the tax authorities on income originating overseas.

Russian Jewish billionaire Roman Abramovich who immigrated to Israeli yesterday instantly became the country's wealthiest citizen. Abramovich has a net worth of $11.5 billion according to Forbes, making him the wealthiest Israeli, surpassing the previously most wealthy Israeli Eyal Ofer's $9.3 billion.  

Above and beyond gaining an Israeli passport, which will get him into the UK without a visa, after the British have 'delayed' granting him a visa for his Russian passport, he is also entitled to tax benefits. In the framework of what is referred to as the Milchan Law, Abramovich gets a 10-year exemption from tax and from reporting to the tax authorities in Israel on income and property originating overseas.

This law, which was enacted in 2008 with the support over various interested and non-interested parties, is the source of the suspicions against Prime Minister Benjamin Netanyahu in the gifts case (Case 1000).

The response to the law after its enactment was almost immediate, and a strange thing happened in Israel in 2009-2010. Almost every week, another expatriate Israeli billionaire decided to return to his or her homeland. The returning tycoons included Sammy Ofer and his son Eyal, billionaire businessperson Arnon Milchan, real estate tycoon Sol Zakay, high-tech entrepreneur Arnon Katz, Shai Agassi (founder of electric car company Better Place, which has since collapsed), and Teddy Sagi.

All of them benefited from the tax reform enacted shortly before giving returning residents a 10-year exemption from tax and reporting on overseas revenue.

Suspicions against Netanyahu concerning this tax legislation were first revealed in February. According to the police, the prime minister acted on behalf of the law granting exceptional tax benefits and an exemption on reporting assets for Milchan.

The law has been controversial for years. Former Israel Tax Authority head Moshe Asher repeatedly tried to have the legislation repealed, or at least the reporting exemption, without any success. Asher was supported by former Minister of Finance Yair Lapid and later by current Minister of Finance Moshe Kahlon, who supported repeal of the law making new immigrants and returning resident economically anonymous in Israel, but to no avail.

Asher inserted a regulation canceling the exemption from reporting for new immigrants into the 2013 Economic Arrangements bill and the option in the law of extending the exemption beyond 10 years (through administrative orders) but encountered opposition from the Ministry of Immigration and Absorption, led by then-minister Zeev Elkin. Asher included the same regulation in the next Economic Arrangements bill, but the 2015 elections thwarted his plans. The 2017-2018 Economic Arrangements bill included a proposal to eliminate the benefits for immigrants in general, but although the matter was raised in preliminary discussions of the bill, the amended proposed budget published on October 31, 2016 did not mention the benefits for immigrants.

Asher repeatedly faced both open opposition from the Ministry of Immigration and Absorption, led by Elkin and later by current Minister of Immigration and Absorption Sofa Landver, and covert opposition. It appeared impossible to repeal the benefits, despite support from the Ministry of Finance. Asher again tried to introduce repeal into the 2019 Economic Arrangements bill, but the item was again separated into a different piece of legislation.

Published by Globes [online], Israel business news - www.globes-online.com - on May 29, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Roman Abramovich
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