Medtronic's Israeli arm faces $190M tax seizure over IP transfer
Court rules 2009 deal included taxable intellectual property sale; Ventor seeks Supreme Court delay.
The Israeli Tax Authority has initiated collection proceedings and imposed asset seizures on Medtronic Ventor, the Israeli subsidiary (wholly owned through a corporate chain) of U.S. medical device giant Medtronic, due to a tax debt of NIS 674 million (approximately $190M). The debt stems from a June 2023 ruling by the Central District Court in Lod, which found that the 2009 sale of Ventor to Medtronic included the transfer of intellectual property, such as 180 patents, making it a taxable transaction.
In a recent petition to the Supreme Court for a stay of execution, Medtronic Ventor, whose parent company trades on Nasdaq with a market capitalization of approximately $100 billion, claims it holds assets worth less than 5% of the tax liability (approximately NIS 28 million). As such, the company is seeking to delay tax collection until its appeal is resolved.
According to the petition, the Tax Authority had not imposed any liens or collected funds until recently, as the parties had been engaged in negotiations aimed at reaching a settlement that would eliminate the need for an appeal.
Medtronic Ventor, founded in 2004, developed an aortic valve implant that can be inserted through the chest wall, avoiding open-heart surgery. In 2009, Medtronic acquired the company for $325 million. Following the acquisition, Ventor continued operating in Israel as Medtronic’s R&D center. However, in April 2012, Medtronic decided to shut down Ventor’s Israeli development activities.
Even after the closure, Ventor continued generating royalty income from its patents. In his June 2023 ruling, Judge Shmuel Bornstein of the Central District Court held that Ventor effectively transferred all of its assets, including its IP, to Medtronic immediately after the share purchase, without full compensation for the intellectual property. The judge concluded this amounted to a taxable event in addition to the share transaction.
The court assessed Ventor's principal tax liability at NIS 321 million. Including interest and inflation indexation, the total now stands at approximately NIS 674 million.
Ventor has appealed the decision to the Supreme Court. According to court filings, the company and the Tax Authority had begun negotiating a compromise deal under which Ventor would pay roughly 40% of the tax debt upfront, with the balance to be paid over six years, implying an immediate payment of around NIS 250 million.
However, Ventor claims that earlier this year, the negotiations collapsed after the prosecution insisted on a broader settlement framework, which Ventor rejected. In response, the Tax Authority imposed seizures. Ventor is now asking the Supreme Court to delay enforcement of the ruling until a final decision is reached.
As of publication, the Tax Authority has not yet filed a response to the Supreme Court.
