Lower home acquisition tax? On August 12, the cabinet approved a bill that includes a proposed reduction in the acquisition tax paid by home buyers. According to the proposals, the rates will remain the same but the lower rates will apply to a bigger slice of the price. And the proposed measures will be implemented retroactively to August 1 - see below. The proposed new acquisition tax rates are as follows: * 0% on the first NIS 850,000 * 3.5% on NIS 850,001 - NIS 1,300,000 * 5% on the balance of the home purchase price This is a change from the current schedule of: * 0% on the first NIS 602,260 * 3.5% on NIS 602,261 - NIS 746,800 * 5% on the balance of the home purchase price A special 0.5% rate on the first NIS 1,127,190 is available to new immigrants on one home only acquired within one year before arrival to seven years after arrival in Israel. It is not yet clear what will happen to the immigrant rate. The proposed new acquisition rates will apply with effect from August 1, but only after the Knesset passes the amendment allowing the changes. In the meantime, if you report a home purchase you will pay tax at the old rate, but you will receive a refund of the difference between the old and new rates if and when the Knesset passes the amendment. The refund will be made automatically with no need to file refund request forms. This is according to an announcement on the Israeli Tax Authority's Web site on August 29. For example, suppose you bought a new home on September 1 for $500,000. Let's assume an exchange rate of $1= NIS 4.12. The acquisition tax amounts to NIS 70,719 at the old rates or NIS 53,750 at the proposed new rates, resulting in a tax saving of around NIS 17,000 or $4,000. That is worth going for. So if you are purchasing a home in Israel right now, ask your real estate lawyer to check the acquisition tax is paid at the old rates under the procedure, which will facilitate the automatic refund once the law is amended. Company cars - new policy: In private companies, it is common practice to register company cars (and other vehicles) at the vehicle registry in the personal name of a shareholder or director. That person sends a declaration to his tax office that the company in fact owns the car. This is in order to get a better price when eventually selling the car on the second hand car market as company cars are sometimes considered to be less well-maintained. The practice was enshrined in an Israeli Tax Authority circular issued in 1993. Not any more. On June 13, 2007, the Legal Adviser to the Tax Authority issued a surprise letter announcing his decision that Tax Offices should not accept such declarations for cars purchased on or after September 1, 2007. Instead, for Israeli tax purposes, a company car must now be registered in the company's name at the vehicle registry. The reason given is that "although there is a legal basis for the approach adopted in the circular, given the position of the Supreme Court in the Sahar case and for the sake of good administration, I have concluded the circular annex should be cancelled." In the Sahar case (Sahar Israeli Insurance Co. Ltd. v Bank Discount Ltd. 5379/95) the Supreme Court stated that registration of a car at the vehicle registry is important as it enables attachment orders and liens on the car to be discovered by a potential purchaser of the car. It is not clear why this matters for Israeli tax purposes. The Institute of Certified Public Accountants here has strongly protested the sudden change of policy by the Tax Authority and pointed out that the practice remains permissible under Israeli property rights law. It remains to be seen how the Tax Authority will react. It seems a pity the Tax Authority has changed the status quo for company cars in a way that will affect small and medium businesses without increasing tax revenues. As always, consult experienced professional advisers at an early stage in specific cases. firstname.lastname@example.org Leon Harris is an International Tax Partner at Ernst & Young Israel.