Bar Refaeli Claims She Doesn't Live Anywhere. The Court Disagrees

Judges dodge the question of whether a person can be devoid of national residency for tax purposes, but Refaeli will still have to pay back millions

Bar Refaeli modeling Carilina Lemke glasses, July 31, 2018
Eyal Nevo

Can a person be devoid of national residency for tax purposes? The tax case involving Israeli top model Bar Refaeli raised that question again. For now, it seems like the courts will be choosing to leave that question open – while demanding Refaeli pay millions in back taxes.

Israel’s courts previously faced claims of non-residency in the case of poker player Rafi Amit, who appealed his case to the Supreme Court in October 2018. In that case, too, the court chose to leave the fundamental question open, while ruling that Amit’s center of life was indeed in Israel, contrary to his claims.

Refaeli is likely to appeal her tax ruling to the Supreme Court as well, after Central District Court Judge Shmuel Bornstein ruled that Refaeli should be considered an Israeli resident for the years 2009-2010, as Israel was the center of her life, even though she was in a relationship with U.S. actor Leonardo DeCaprio at the time.

>> Read more: Living under the opperssive regime of Bar Refaeli | Opinion

Refaeli had claimed in court that it was theoretically possible for a person to be a resident of no country, and that this rare situation fit the life of the international model, who traveled around the world for work, visiting dozens of countries and taking more than 100 flights over the period in question.

During those years, Refaeli paid U.S. tax only on money she earned there, but not on all her earnings over that period. She explained this by saying that she didn’t meet the standard for U.S. residency for tax purposes, which is based on the number of days spent in that country.

Borenstein noted the fact that Refaeli hadn’t cited another country as her place of residency. This mattered from two perspectives, he ruled. The first is a person’s center of life. In that regard, he cited the 2014 Supreme Court ruling in the case of one Michael Sapir, the first case in which the court recognized international residency.

Sapir himself worked in Singapore, had a business in Singapore, paid tax in Singapore, and had permanent residency in Singapore, while his wife and daughters remained in Israel. The ruling in this case hinged on the divided family, and the fact that Sapir had strong ties to another country, namely Singapore. Refaeli met no such standard, Borenstein noted.

The second issue is the fundamental question of whether a person can truly lack residency in any country, noted Borenstein.

This question arose in the case of the poker player, Amit, who argued that he’d spent only 30 days in Israel in the year 2007 and thus shouldn’t be considered a resident for tax purposes. He was not recognized as a resident of any other country, either.

Central District Court Judge Harry Kirsch ruled in Amit’s case in 2016 that he hadn’t managed to prove a lack of ties to Israel. He noted that in formal legal terms, there may be rare cases of people with no permanent residency – such as a person who lives on a yacht with no permanent port. He added that the state budget should be used primarily to provide services for the Israeli residents who use them, and that Amit hadn’t proved that his ties to all countries were tenuous to the extent that he didn’t make use of Israel’s services.

Amit’s case reached the Supreme Court, where Justice Neal Hendel also addressed the fundamental question of whether a person could really have no permanent residency for tax purposes. Ultimately however he ruled that there was no reason to settle the question in Amit’s case, as he still met the standard for being considered an Israeli resident.

In Refaeli’s case, too, Bornstein skirted this fundamental question, ruling that he wasn’t convinced that she’d cut her ties to Israel.

“I’m convinced that the petitioner’s case is as far as can be from being a stateless person who passes his days on a yacht without a permanent port,” he wrote.

Even if Refaeli’s frequent flights could be considered a type of “life on a yacht,” you couldn’t say that the yacht didn’t have a permanent port to which it always returned – and that this port was Israel.

“Ultimately, the yacht docks at Israel, where she consumes the public services that the state grants its residents and citizens,” he wrote.

Both Refaeli and Amit were young, unmarried and childless during the years in question, and their subjective impression was that their time abroad made them stateless. Refaeli tried to differentiate her case from that of Amit, but Bornstein ruled that they were in fact quite similar.

In his ruling, he wrote that Amit’s case primarily shows that young Israelis of Refaeli’s age at the time, who were born and grew up in Israel but are still unencumbered by family, frequently travel abroad for long stretches for work or personal reasons, but ultimately return to Israel for visits and ultimately come home to Israel as they enter the next stage of life. These people should be considered Israeli residents, he wrote.

For the record, Refaeli is unlikely to have her ruling upended by the Supreme Court. Of the 76 rulings the Supreme Court handed down in tax-related cases in 2017, it sided with the state partially or in full in 97% of cases.