Question:

What taxes are due when real estate property changes hands ? Do the circumstances in which it changes hands make any difference to how much tax is due ?

Answer:

The 1963 Land Taxation Law governs taxation on real estate and three types of taxes are due in principle – two taxes,sales tax and property appreciation tax, fall on the seller, and one, property acquisition tax, falls on the buyer.

The circumstances in which property changes hands can certainly affect how much tax is due. Where a transfer rather than a sale is involved - e.g. inheritance, divorce or gift - the situation is different. Exemptions or partial exemptions or more favourable terms exist.

Question:

If an apartment is ‘given’ to a relative does the person making the gift have to pay sales tax ?

Answer:

No! Transfer of rights in a property without money to a relative is exempt from sales tax otherwise due – according to the Land Taxation Regulations. Relatives are defined as: spouse, parent, grandparent, descendant, spouse’s descendant and the spouse of either the descendant or spouse’s descendant, brother or sister where the apartment was received as a gift or inheritance from a parent or grandparent.

Question:

Would the option in divorce negotiations of property being transferred from one spouse to the other , still mean that tax is due ?

Answer:

No ! Where rights in a property are transferred to a spouse ccording to a divorce agreement which receives court authorisation in a judgment - then tax exemption exists because the transfer is not regarded as a sale under the Land Taxation Law of 1963.

Question:

Is tax due on the transfer of property from a spouse to children, as part of a divorce settlement ?

Answer:

No! Where rights in a property are transferred to mutual children according to a divorce agreement which is authorised by court and incorporated into a judgment - then the transfer is exempt from tax because the transfer is not regarded as a sale under the Land Taxation Law.

Question:

If a parent makes a real estate gift to his son or daughter, will there be any reduction in tax due because it is a gift to a relative ?

Answer:

Yes! Under The 1963 Land Taxation Law the transfer of property rights to a relative without actual payment between them is exempt from property appreciation tax. The relative who receives the property as a gift will only be required to pay one third of the Property acquisition tax normally due.

Question:

If a husband wishes to make his wife a gift of  half of the rights in the marital home (registered in his name, from before their marriage) ,will any taxation exemptions apply ?

Answer:

Yes, exemptions will apply. Under The Land Taxation Law the ‘sale’ of property rights to a relative without actual payment between them is exempt from property appreciation tax. Regarding Property acquisition tax there will be a full exemption here, too. This is because the real estate involved is the family home where the couple live together.

Question:

Will any tax exemptions be due if a man makes a gift of half of his apartment to his female cohabitee, that he owned before they met ?

Answer:

Yes, cohabitees are eligible for certain exemptions when they transfer property as a gift from one to the other, depending on the circumstances. Where a man transfers rights in the apartment to the woman he lives with, or vice versa,, where they have been living together as a couple for at least a year , then no property appreciation tax will be due on the transferer. The property acquisition tax due to be paid by the recipient will be a third of the normal value. A married spouse would get a full exemption.

Question:

I want to buy an apartment. I have not sold my present apartment yet but intend to when I get a good offer. If I don’t manage to sell it before I buy how will this affect me tax-wise ?

Answer:

When someone buys a home in Israel he is supposed to pay property acquisition tax. A more favourable rate of purchase tax is available where the home purchased is regarded as a sole home, under the Land Tax Law. The intended home will be regarded as a single home if the old one is sold within a year of the new one being bought.

Property Acquisition Tax – Inherited Property Exempt

Question:

Will a person who inherits an apartment from a relative under a will have to pay acquisition purchase tax like someone who buys real estate  ?

Answer:

No!  Inheritance is not regarded as a sale for the purposes of real estate taxation – accordingly someone who inherits an apartment will not have to pay property acquisition tax. Under the Land Taxation Law this exemption applies equally to property inherited under a will or according to law, where the deceased did not make a will.

Question:

What is the tax situation when a person who inherited an apartment many years ago wants to sell it ?

Answer:

As a general rule when a property owner sells real estate he has to pay sales tax and property appreciation tax. The latter is basically a tax on the appreciation in the value of property between the time the intended seller bought it and when he sells it. Where the intended seller did not actually buy the real estate, but inherited it the Land Taxation Law states two possibilities for calculating the value of the property when the intended seller acquired it. If the person bequeathing the intended seller the property died before 1.4.81 ,then what counts is the value of the acquisition when the bequeathor passed away . If the bequeathor died after 1.4.81 the person inheriting the property steps into the shoes of the bequeathor and the value is calculated as being that when the bequeathor acquired it.

Tax Relief and Child Maintenance

Question:

Is there any income tax relief for those who pay child maintenance ?

Answer:

Yes. In July 2003 the Supreme Court settled the issue of child maintenance and tax relief, holding that a parent supporting a minor child was entitled to up to one tax credit point, and a child over 18 to two tax credit points. A parent with whom a child lives for at least three days a week is entitled to gain a proportionate share of the tax credit point/s, it was held.

Question:

Is there any income tax relief for those who pay maintenance to other relatives ?

Answer:

Yes. In July 2003 the Supreme Court settled the issue of child maintenance and tax relief, holding that someone who supports a relative arising from an obligation under the The Maintenance (Amendment) Act of 1959 was entitled to two tax credit points.

Question:

To be eligible for certain property tax exemptions I need to be regarded as divorced in Israel. My ‘ex’ and I have no religion. We have dual nationality but the country where we married and divorced and Israel do not recognise each other’s legal decisions. Can I still get my foreign divorce recognised in some way in Israel so that I can be eligible for the exemptions ?

Answer:

Yes ! In such a situation it should be possible for the family court to give indirect recognition to the foreign divorce and give a declaratory judgment to this effect which would be sufficient for the purposes of being eligible for property taxation exemptions available regarding divorce.