The government is trying to bring down the price of buying houses and apartments in Israel. "Sell, Sell, Sell" the government is shouting to anyone – Israeli citizen or not – who owns more than one residential property. The "carrot and stick" approach to the market has arrived. On the one hand, the government is offering you incentives to sell your properties now and, on the other, you may pay a penalty from next year if you don’t.
The high cost of residential accommodation in Israel was one of the flashpoints for the protests this summer. In an attempt to bring down prices, the government is hoping to increase the number of residential properties on the market by offering additional exemptions from Land Appreciation Tax (the tax paid on profit when property is sold) until the end of this year.
For example, in addition to the existing exemption available once every four years on a sale, you are entitled to sell an additional two properties, each with a value of up to NIS 2.2 million, free of tax until December 31. If your property is worth more than this, you will pay tax proportionately on only the extra amount. That's the carrot.
But, if you don’t sell, and you own more than one residential property, from January 1, 2013 you will only be able to sell one property free of tax every eight years. That eight year period starts from the date of your last sale, even if before January 1, 2013. That's the stick.
Q: My wife and I are planning to move to Israel towards the end of this year. Our daughter lives in Modi'in and we would like to help her by buying an apartment there which she can live in. We intend to keep that apartment in our names. When we move to Israel, we are planning to buy an apartment in Raanana ourselves. Are we allowed to own more than one home in Israel?
A: You are allowed to own as many residential properties as you like in Israel but the government is trying to bring home prices down by using taxation to make multiple ownership an unattractive option. The changes in the Land Appreciation Tax regime, which I discuss above, will mean that if you own more than one residential property then, from the start of next year, you will only be able to sell one property every eight years free from tax.
In addition, to dissuade you from buying more than one home, the government has already brought in a substantial increase in Acquisition Tax on the purchase of "additional" properties. This means that if you buy a apartment in Raanana for NIS 2,500,000 and this is your only residential property, the tax would be just under NIS 50,000. However, if you were to buy the apartment in Modi'in first, you would pay approximately NIS 140,0000 in Acquisition Tax when you buy the apartment in Raanana (at current rates). This may affect your plans.
This article is presented for your general information and does not constitute legal advice. You should obtain specific legal advice about your estate before taking (or deciding not to take) any action. Please contact Caroline for further information.© SaftWalsh 2011. All rights reserved.