Abramovich dodged millions in tax with superyachts-for-hire scheme

It was Christmas 2011, a year after Roman Abramovich had taken delivery of his new superyacht, Eclipse. But it seemed the oligarch would not be using it over the festive period – records show it had been chartered by a company based in the British Virgin Islands.

And yet photographs from Christmas Day that year show Mr Abramovich in the Caribbean sunshine, standing on the swim platform at the rear of the yacht, with Eclipse’s large letter-E logo behind him.

Charter records such as this were part of a decade-long scheme to mislead tax authorities, now uncovered in an investigation by the BBC and the Bureau of Investigative Journalism.

The scheme falsely presented the Russian oligarch’s fleet of yachts as a commercial leasing operation, to dodge millions of euros in VAT on their purchase and running costs.

“There has been tax evasion,” Italian tax lawyer and professor Tommaso Di Tanno told the BBC. “This is criminal.”

In a statement, lawyers for Mr Abramovich – who now reportedly divides his time between Istanbul, Tel Aviv and the Russian resort of Sochi – said he had “always obtained independent expert professional tax and legal advice” and “acted in accordance” with it.

The billionaire, who was sanctioned by the UK in March 2022 over his connection to Vladimir Putin’s regime, bought five luxury yachts over the course of the 2000s that were involved in the tax scheme.

Among them was the 115m (377ft) Pelorus, which he reportedly lent to Chelsea footballer John Terry for his honeymoon in 2007 – and Eclipse, which at 162.5m (533ft) was once the largest private yacht in the world and worth an estimated $700m (£559m).

The scheme to dodge tax on the yachts – and other secrets of the sanctioned oligarch’s corporate empire – is laid bare in over 400,000 files and 72,000 emails leaked from a Cypriot corporate service provider, MeritServus.

They show how MeritServus administered the oligarch’s businesses through a global network of companies owned by a series of trusts of which Mr Abramovich was the beneficiary.

The BBC and its media partners, including the Guardian, have been reporting on the leaked files since 2023 as part of the International Consortium of Investigative Journalists’ Cyprus Confidential investigation. We previously revealed Mr Abramovich’s financial links to one of Mr Putin’s closest associates, accused of holding the president’s wealth.

The files reveal how Mr Abramovich’s advisers helped him avoid paying huge tax bills on the yachts’ running costs in EU waters by using companies to hire them out to himself or other companies he controlled.

Documents show how the five yachts were leased to a company in Cyprus called Blue Ocean Yacht Management, which chartered them on to a handful of companies in the British Virgin Islands that appeared independent – but which were all in fact controlled by Mr Abramovich.

The scheme to dodge VAT in Cyprus was set out in a revealing 2005 memorandum on the proposed “Operating Structure” for the management of Mr Abramovich’s yachts.

“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,” wrote the memo’s author, Jonathan Holloway, then a director of Blue Ocean.

• You can hear File on 4 Investigates: Abramovich, the Yachts and the Tax Dodge on BBC Radio 4 at 20:00 on Tuesday 28 January and at 11:00 on Wednesday 29 January – or on BBC Sounds

Although Blue Ocean and the companies hiring the yachts were all owned by Mr Abramovich’s trusts, they were intended to appear unconnected “so that an investigator checking on our operation would see it as a legitimate structure”, Mr Holloway wrote in the memo he sent to some of Mr Abramovich’s closest associates.

Mr Holloway warned them they should be “aware of the risks”. He wrote: “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.”

Mr Holloway wrote that Blue Ocean, the companies to which it leased the yachts, and the ultimate “customer” should not have the same shareholders, directors or registered addresses, to avoid any “common link” that might arouse suspicion.

As the memo noted, Mr Abramovich’s lawyer had agreed to put the ownership of Blue Ocean into an entirely separate trust – apparently distancing it from the other companies.

Sure enough, ownership of the yacht management company Blue Ocean was subsequently transferred from the oligarch’s main trust to a new one, the Neptune Trust.

The way Mr Abramovich’s companies leased the yachts to each other, Prof Di Tanno told the BBC, was an “artificial structure” that evaded tax – a criminal offence.

“My conclusion is that in the case, there has been a tax evasion… because all the parties know exactly what to do in order to hide the reality,” he said.

Tax expert Rita de la Feria told the BBC she had seen in the yacht scheme “indications” that they “may be misrepresenting information”.

“If that is the case, then we are now in the realm of evasion,” she added.

Mr Holloway, who stepped down as a director of Blue Ocean about 15 years ago, told the BBC that he “joined Blue Ocean 20 years ago and was there for a relatively short period of time”.

He said he had “managed literally hundreds of vessels from many different locations around the world”. “I can’t be expected to remember the individual circumstances of every vessel I have ever managed,” he said, adding that he “used structures others in the industry were using”.

Lawyers representing Mr Abramovich told the BBC he denied “any allegation that he had any knowledge” or was “personally responsible” or liable for “any alleged deception of any government authority” to evade tax.

His lawyers said that just as Mr Abramovich sought professional legal and tax advice and acted on it, he expects that “similar advice was sought at the relevant times by those with responsibility for the day-to-day running” of the companies involved in the scheme.

If this were a real superyacht leasing business, substantial profits might be expected. However Blue Ocean’s accounts show that from 2005 to 2012, its expenses almost matched its income.

This meant almost no corporation tax was due as the company’s profits were tiny.

A note from the Blue Ocean director suggests the close matching of expenses and income was no accident and the company would generate charters when the scheme needed to cover expenses.

“At the beginning of each week we will have a meeting in Blue Ocean where we will look at our current bank balances and our cash needs for the next 1~2 weeks [sic]. If we see a need for a cash injection we will raise an appropriate time charter and invoices,” he wrote.

There is also evidence in the leaked files that charter agreements were backdated. This includes a time charter agreement supposedly signed in July 2005 by Blue Ocean and another Abramovich company in the BVI called Eyke Services. However, records show Eyke Services did not exist at that point – it was not incorporated until a month later.

In another case, a director of Blue Ocean requested the production of a backdated and signed time charter in order to obtain delivery of duty-free fuel for Mr Abramovich’s 86m (282ft) yacht Ecstasea – which could accommodate 15 guests in eight suites – saving the billionaire $44,000 (£35,000) in tax.

In the documents, tax consultants from Deloitte in Cyprus wrote to Mr Holloway, the Blue Ocean director, saying if the ships were pleasure vessels, they would have to pay VAT. But if the vessels were classified as commercial, they would not.

A leading superyacht lawyer Benjamin Maltby told the BBC the type of contracts used for many of Mr Abramovich’s luxury yacht charters were actually designed for commercial ships carrying dry cargos such as grain or steel.

This gives us more evidence that the whole commercial “look” of the operation was a sham.

Mr Abramovich’s superyacht scheme came under legal scrutiny twice, with varying levels of success, the BBC and Bureau of Investigative Journalism has learned.

Richard Bridge captained two of Mr Abramovich’s yachts for almost six years from 2006 to 2012, including the Pelorus, and the giant Eclipse, the pride of Abramovich’s fleet. A couple of years after he finished working for Mr Abramovich, the captain was stopped and questioned at Amsterdam’s Schipol Airport.

Italian prosecutors had started proceedings against three of Mr Abramovich’s captains – including Mr Bridge – for unpaid excise duties on refuelling and tax evasion.

But Mr Bridge told the BBC he had contacted Blue Ocean and “their lawyers got onto it”, telling him a few months later the case had been dropped.

Italian court records seen by the BBC show proceedings were halted after the lawyers “produced documentation” proving Pelorus was “entered in the registers as a commercial boat as it is used for commercial purposes or for hire”.

Mr Bridge said he was unaware Mr Abramovich also controlled the companies that were chartering the yachts.

In Cyprus, tax officials were separately investigating Blue Ocean over up to €17m (£14.3m) in unpaid VAT, disputing the company’s claim to be “zero-rated” for VAT because it was a commercial operation.

Blue Ocean’s lawyers said demands to provide evidence the vessels had been used commercially by the companies chartering them were “unreasonable and oppressive”, but they had asked its clients anyway and received no response.

We now know that Blue Ocean’s clients were, of course, Mr Abramovich’s other companies.

According to an appeal judgement in 2018, VAT investigators found Blue Ocean had failed to present any evidence the companies chartering the yachts were “engaged in economic activity” and its claim that the boats were used for commercial purposes was rejected.

In the end, Cyprus pursued Blue Ocean for the lower figure of €14m (£11.8m).

We do not know if the sum was paid – the company failed to attend its own appeal in March 2024 and was dissolved four months later.

Cyprus Confidential is an international collaborative investigation launched in 2023 led by the International Consortium of Investigative Journalists (ICIJ) into Cyprus firms which provided corporate and financial services to associates of Russian President Vladimir Putin’s regime. ICIJ reporting team: Simon Lock and Eleanor Rose.

Media partners include The Guardian, the investigative newsroom Paper Trail Media, the Italian newspaper L’Espresso, the Organised Crime and Corruption Reporting Project (OCCRP) and the Bureau of Investigative Journalism (TBIJ).