How did a tax demand of NIS 1 billion from Sammy Ofer turn into a payment of just NIS 107,000?
This morning, the court allowed publication of the tax settlement that the Israel Tax Authority reached with the heirs of the late Sammy Ofer. The Tax Authority forewent a demand for payment of about NIS 1 billion in tax on Ofer's income in the years 2006-2009.
For 2010, the Tax Authority insisted on payment of tax on Ofer's income in Israel that year, and his heirs agreed to pay the demand, amounting to a mere NIS 107,000, "under protest", without admitting that their father was an Israeli resident in the tax year in question.
One tax year remains in dispute between the sides as to the amount of tax that the estate should pay - 2011, the year in which Samy Ofer died. To judge from the previous years, the state will probably not see much revenue from the discussions concerning that year.
Shipping magnate Sammy Ofer died in June 2011 aged 89. Before his death, Ofer was considered one of the richest Jews in the world, and his wealth was estimated at some NIS 10.3 billion. The proceedings concerning his estate took place in the Family Court, and so the details were privileged.
Until 2009, Ofer lived in Monaco, and then he returned to Israel. Before his death, he took care to divide the management of most of his assets between his two sons, Eyal, the elder, and Idan. Most of the businesses in Israel are managed by Idan Ofer, who also lives in Israel, while most of the overseas businesses are managed by Eyal, who lives in London.
The Ofer family's main business in Israel is Israel Corporation, a holding company that controls, among other companies, Israel Chemicals (TASE: ICL: NYSE: ICL), Oil Refineries Ltd. (TASE:ORL), Zim Integrated Shipping Services Ltd., and Tower Semiconductor Ltd. (Nasdaq: TSEM; TASE: TSEM). Eyal Ofer is responsible for the family's private real estate business, estimated to be in the billions of dollars. He also manages a large part of the family's shipping business, headed by cruise line Royal Caribbean.
The dispute between Sammy Ofer's heirs and the Israel Tax Authority arose after Ofer died, when the Tax Authority demanded about NIS 940 billion from the estate in an assessment issued according to the Authority's best judgment. In the demand issued to the executors of the estate, the Authority claimed that Ofer's income of NIS 2 billion in the years 2006 to 2010 was derived when he was a resident of Israel. The executors, Adv. Pinhas Rubin and Amnon Leon, lodged an appeal against the assessment in the Haifa District Court.
After the order for payment of hundreds of millions of shekels was issued, the amount in dispute between the sides changed, but the question of principle remained the same.
The dispute revolved around the issue of Sammy Ofer's residence: whether he was an Israeli resident during the years in dispute, as the Haifa tax assessor claims, or a foreign resident, as the executors claim. The decision on this matter was crucial to the outcome of the tax assessment and how much the Tax Authority would actually receive.
Despite the agreement between the sides that the Tax Authority will forego its demand for a tax payment from the estate for the years 2006-2009, and the agreement to a tax payment for 2010, they did not manage to settle the principle question of Ofer's country of residence in the years before his death. Nor was this issue decided by the court. In the agreement signed by the Israel Tax Authority and the heirs of Sammy Ofer it is stated that the parties agree that the dispute over residence has not been decided as such, and in the subsequent agreement on the tax payment for 2010, the heirs give notice, as mentioned, that they do not admit that their father was an Israeli resident before his death.
Published by Globes [online], Israel business news - www.globes-online.com - on February 29, 2016
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