An investigation has revealed that Russian oligarch, Roman Abramovich, used a scheme to save millions of euros by falsely classifying five of his superyachts as commercial vessels.
This allowed him to avoid paying VAT in European countries where his yachts received services such as refueling.
“There has been tax evasion,” Italian tax lawyer and professor Tommaso Di Tanno told the BBC. “This is criminal.”
Normally, private vessels are subject to a sales tax of around 20% in EU nations.
Between 2005 and 2012, five of Abramovich’s superyachts, including The Eclipse, which was once the world’s largest, sidestepped this requirement by claiming they were being chartered out to customers.
However, a joint investigation by the BBC, the Guardian, and the Bureau of Investigative Journalism uncovered that this was not the case.
The yachts were managed and leased by Blue Ocean Yacht Management, a Cyprus-based company controlled by Abramovich.
The company then rented the yachts to “customers,” but the clients were all registered in the British Virgin Islands and were owned by Abramovich himself.
Leaked files from Cyprus show that this arrangement was outlined in a 2005 email from Blue Ocean director Jonathan Holloway, who recently told the BBC that he could not recall the “individual circumstances of every vessel I have ever managed.”
In the email, Holloway stated, “We want to avoid paying VAT on the purchase price of the yachts and where possible to avoid paying VAT on goods and services provided to the yachts. Our structure must as clearly as possible separate the different parties so that an investigator checking on our operation would see it as a legitimate structure. But we all have to recognise that a determined investigator could eventually discover this is an in-house structure with the possible consequences that would entail.”
Although European authorities had taken action against Blue Ocean in the past, they did not seem fully aware of the yacht scheme.
In 2015, prosecutors in the Italian port of Trieste attempted to recover €500,000 from Blue Ocean for allegedly unpaid refuelling duties.
However, the case was dropped after Abramovich’s associates claimed the yachts were being used for commercial purposes.
In 2012, authorities in Cyprus disputed the company’s VAT exemption claim, asserting that Blue Ocean owed over €14 million in unpaid taxes from December 2005 to August 2010.
Lawyers for Blue Ocean contested the claim, but the Cypriot Supreme Court dismissed their appeal last March. Four months later, Blue Ocean was dissolved.
In a statement, Abramovich’s lawyers said he had always sought and acted in accordance with expert tax and legal advice.
They added that their client was unaware of the scheme and denied personal responsibility.
