Court Orders Joey Shuval to Pay 35.6 Million Shekels in Tax on Company Withdrawals
Joey Shuval, co-owner of the global Zara franchise group, has been ordered by the Tel Aviv District Court to pay approximately 35.6 million shekels in taxes on withdrawals totaling about 108 million shekels from a company under his control. The court ruled in favor of the tax assessor, determining that the funds transferred to Shuval and related companies were not loans but dividend withdrawals subject to income tax.
Shuval controls Gottex Brands (Gottex Holdings), the main franchisee in Israel for the international fashion giant Inditex, which includes Zara, Pull & Bear, and Massimo Dutti. He also holds half the shares of the Dutch company Findings, which previously owned Swimwear and was sold to Gottex Holdings in a complex corporate transaction in 2013. A prior court ruling in July 2023 found that the sale was an artificial transaction intended to reduce taxes, resulting in partial tax liability.
Following the sale, funds were transferred from Gottex Holdings to Findings to repay debts and loans accumulated by Swimwear. Among these were transfers of about 108 million shekels, allegedly loans, from Findings to Shuval and his controlled companies. The recent ruling addressed six appeals by Shuval and a family company against tax assessments for 2015-2017, focusing on whether these funds were tax-exempt loans or taxable dividend withdrawals.
Shuval's legal team argued the funds were loans despite no repayments over years, while the tax assessor contended these were dividend withdrawals taxable as income. Judge Yardena Sarusi sided with the tax assessor, stating Shuval failed to prove the loans were repayable and did not provide objective evidence clarifying the funds’ path or loan terms. The funds were not reflected as loans in company financial reports, indicating they were effectively withdrawals by the controlling shareholder.
The court noted Shuval treated the companies as personal wallets serving his interests without respecting their separate legal status. Shareholders owning 10% or more pay a 30% dividend tax plus a 3% surtax on income exceeding 721,560 shekels annually. Consequently, Shuval and his company face an estimated total tax of 35.6 million shekels on the 108 million shekels withdrawn. Some of Shuval’s other tax claims were partially accepted in the appeals.
Summary: Joey Shuval must pay 35.6 million shekels in taxes after the Tel Aviv court ruled that 108 million shekels withdrawn from his companies were taxable dividends, not loans. The decision follows a prior ruling that deemed a related corporate sale a tax avoidance scheme. Shuval’s appeals on other tax issues were partially upheld.
