Israel Real Estate Law

Due to the housing shortage which was one of the causes of the widespread tent protests this past summer, the government has taken steps to encourage investors to sell their properties and to discourage them from buying more properties by increasing the purchase tax and eliminating the capital gains on sales of residential properties if it is not the seller's main residence.

The purchase tax rates are as follows: for a purchase price up to 1,350,000 NIS- 0%, 1,350,000 NIS to 1,601,210 NIS- 3.5%, above 1,601,210 NIS– 5%.

Under Section 49B of the Land Tax Law, the sale of a residential property may be eligible for an exemption from the capital gains tax if one of the following conditions are met:

1. the seller has not sold a tax-exempt property within the last 4 years (but starting January 1, 2013 until January 1, 2021, for the last 8 years;
2. the property being sold is the seller's only residential property in Israel and he has not sold a tax-exempt property within the last 18 months, and in the last 4 years he has not owned more than one residential property at a time.
3. a beneficiary of a relative's will (a parent, parent-in-law, or spouse) is entitled to the exemption if the deceased person would have been entitled to it were he still alive.

The law in effect now give sellers in the year 2011 an exemption on the capital gains tax for residential properties up to a value of 2.2 million shekels. And sellers can use this exemption up to two times in the calendar year.

Furthermore, the law also reduced the betterment tax imposed at the time of issuance of a building permit or the sale of properties whose value has risen due to changes in the rights or zoning of the property. The maximum rate was reduced from 45 to 20 percent.

For a Hebrew article on this, see here.

For an English article see here.