Taxation – other topics -Transferring Property
This section gives examples of typical situations in which real estate is transferred – and whether exemptions or partial exemptions ( on property appreciation and sales taxes) apply to the person transferring the property.
Property Appreciation Tax - When Inherited Property Sold
Question:
I inherited an apartment from my father many years ago. I want to sell it.
I understand that I may have to pay ‘property appreciation tax’. How will this be calculated ?
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 afer 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.
Property Appreciation Tax Exemptions – Frequency
Question:
How frequently can someone ‘go up in the world’ by selling the apartment they live at a profit and buying a better one – without losing out tax-wise ?
Answer:
Generally when someone sells real estate he has to pay property appreciation tax on the profit made . When the real estate concerned is the person’s home it fits into the definition of ‘ an entitled dwelling apartment’ under the Land Taxation Act of 1963, he may be eligible for an exemption . Where at any one time a person owns only one property in Israel he is eligible for a special exemption from property appreciation tax for a sole dwelling apartment- without any restrictions. If, however, he owns more than one apartment , and wants to sell some of them, and still be eligible for an exemption from land appreciation tax on the basis of an ‘entitled dwelling apartment’ he can only do so if he sells an apartment once every four years.
Property Appreciation Tax Exemption – 50% 'Dwelling'
Question :
Will the fact that part of an apartment was used as an office or clinic stop the owner from enjoying an exemption from property appreciation tax that he would otherwise be entitled to when he sells it ?
Answer:
Not if at least 50% of the area of the apartment was used for a dwelling place, as the exemption under the 1963 Land Taxation Law applies to an apartment which was ‘mainly used for dwelling.’
Property Appreciation Tax Exemption – Apartment Rented For Religious Activity
Question :
After it stood empty I rented out a ground-floor apartment to an organisation which runs a yeshiva there. No one has lived in it for ages. I am now considering selling the apartment but am concerned because I have heard that an apartment which is used as a home is exempt from property appreciation tax. Will the fact that the apartment has either been empty or used as a yeshiva stop me from enjoying this exemption ?
Answer:
No! Under the 1963 Land Taxation Law where an apartment has been empty or used for religious or educational activities it is regarded as having been in residential use and the exemption is not affected.
Property Appreciation Tax Exemption – Apartment Used For Education
Question :
I rented out a ground-floor apartment to a woman who runs a kindergarten there. I am considering selling the apartment. I have heard that an apartment which is used as a home is exempt from property appreciation tax. Will the fact that the apartment has been used as a kindergarten stop me from enjoying this exemption ?
Answer:
No! Under the 1963 Land Taxation Law where an apartment has been used for educational activities its use is regarded as residential and the exemption is not affected
Waiting Time – Exemptions Re Sale of Gift Apartment
Question:
I received an apartment as a gift from my grandmother . I only lived in it for a short while as I studied abroad. Will this influence the tax due on the apartment if I decide to sell it ?
Answer:
Under the 1963 Land Taxation Law a person who receives an apartment as a present will not be entitled to any exemption due regarding property appreciation tax when he sells it if he does not wait the necessary qualifying period. Where he did not live in it as a permanent residence he must wait four years from when he became the owner before he will qualify for the exemption. Where the person making the gift is a parent the waiting period is only three years.
Exemptions Re Sale of Apartment Parents Give
Question:
My parents gave me a present – an apartment. I never used it much as I lived in another part of Israel. Does this affect the tax due on the apartment if I decide to sell it ?
Answer:
Under the 1963 Land Taxation Law where a person who received an apartment as a present from his parents , but did not live in it all the time , must wait three years from when he became the owner before he will qualify for the exemption from property appreciation tax.
Property Appreciation Tax Exemptions Re Lived-In Gift Apartments
Question:
I received the apartment in which I live as a gift. It has gone up considerably in value. Will I be entitled to any exemption from property appreciation tax because it was a gift ?
Answer:
Exemptions on property appreciation tax are regulated under the 1963 Land Taxation Law . Where a person who receives an apartment as a gift lives in it he must wait three years from when he became the owner and started to live there before he can qualify for an exemption from property appreciation tax . If, however, the gift was from a parent to a child the seller need only wait one year, and not three.
Transfers/Gifts To Relatives Exempt From Property Sales Tax
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.
Taxation on Sale of Apartment Received By Minor
Question :
My grandparents gave me an apartment as a gift when I was 16. I am now in my twenties and it has gone up in value . Will the fact that I was a minor affect me tax-wise if I sell it ?
Answer:
Yes. Where someone receives an apartment as a gift when he was under 18 – the waiting period governing exemption from property appreciation tax will only start when he reaches adulthood (18). Thus someone who received an apartment as a gift when he was 16 from his grandparents will have to add another two years on to the waiting period applicable to him. If he never lived in it permanently the normal waiting period of 4 years will be increased to 6 before he can sell it and benefit from the exemption. If , however, he did live in it permanently, the normal waiting period is 3 years after he started living in it – and this will be increased to 5 years in this Question because he received it as a minor.
Property Appreciation Tax – Dwelling Used As Office
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.
Property Sale – Reporting To Tax Authorities
Question :
Does someone who sells real estate have to actively report on this to the tax authorities – if so, when ?
Answer:
Under the 1963 Land tax Law someone selling rights in property must either declare the sale to the Property Appreciation Tax head within 30 days of the sale , or send him his own assessment of the tax due within 50 days.
Property Appreciation Tax – Dispute
Question :
After informing the authorities that I had sold my apartment I received a demand for property appreciation tax. I thought I was entitled to an exemption. What can I do ?
Answer:
Under the 1963 Land tax Law a person who considers the assessment of the tax authorities is incorrect can dispute it by notifiying the head of the Property Appreciation Tax Authority within 30 days.
Property Appreciation Tax – Answer Re Disputed Assessment
Question :
I disputed the assessment the authorities sent me after I declared that I had sold my apartment . It is now several months since I notified the head of the property appreciation tax authority that I disagreed – and still have had no answer. Is this normal ?
Answer:
Yes ! According to the 1963 Land tax Law the head of the Property Appreciation ax Authority has a year in which to give a reasoned answer on a disputed assessment from the time he received it – or within 30 days of him confirming receipt of all the relevant documentation, whichever is later. If the head has not answered within this period then the person’s challenge is regarded as being accepted.
Challenging Property Appreciation Tax Head’s Decision
Question :
Can a decision of the property appreciation tax authority’s head be challenged ?
Answer:
Yes, where it is felt that he did not exercise his discretion given to him by law correctly then a right to a quasi-appeal exists before a special committee – within 30 days.
Property Appreciation Tax – Appealing Committee’s Decision
Question :
Can a decision of the property appreciation tax authority’s appeal committee be appealed ?
Answer:
Yes – a right of appeal exists to the Supreme Court , but only after the committee has given a final – not intermediate or temporary decision . The appeal must be filed within 45 days of the decision, or of it reaching the prospective appellant.
Property Appreciation Tax – Payment Deadline
Question :
When must property appreciation tax be paid ?
Answer:
When the person being assessed files his own , independent assessment within 50 days of the sale payment must be included. Where the authorities make the assessment payment must be made within 14 days of the notification of the amount due.
Newly-Weds - Taxation Exemptions Re Property
Question:
I am due to get married soon. Both my fiancי e and I own small apartments.We are hoping to sell these and buy a bigger apartment as we plan to start a family. We know that the value of each apartment has gone up since we owned them. Will we be entitled to any tax exemptions regarding the sale of our property ?
Answer:
Special exemptions or partial exemptions exist re property appreciation tax in the Land Taxation Act which are designed to benefit young couples wishing to sell smaller properties and purchase a larger one. To qualify for the exemptions/partial exemptions on the sales the couple must be residents of Israel and have to sell their two small apartments within 12 months of each other . They must purchase the new apartment either a year before or after the sale of the second apartment- and it must cost at least three quarters of the value of the two smaller apartments together . These exemptions are given only once to each family unit.
Property Appreciation Tax – Exemptions and Family Unit
Question:
During my marriage my husband and I bought an apartment. We decided to divorce. In our divorce agreement it was stated that the apartment would be sold and the proceeds divided between us. Because of the recession we were slow to sell it and we got divorced before we actually sold it . I have now remarried. My new husband and I have decided to make a fresh start by buying another apartment in a different city – with him selling the apartment he owned before we met and me selling my part of the apartment from my first marriage. My new husband managed to sell his apartment first and a few months later my ex-husband and I managed to sell our apartment . Will any of us have to pay property appreciation tax assuming the values of both apartments have increased ?
Answer:
A former husband and wife should report separately to the tax authorities about the sale of their jointly-owned apartment. It is likely that they will have different obligations or exemptions regarding property appreciation tax if they sell their jointly –owned apartment and divide the proceeds after their divorce.
In the above situation assuming the first husband did not sell another apartment with an exemption from property appreciation tax in the previous four years he will be exempt from taxation on his part. However, the ex-wife’s situation is different. Assuming her new husband sold an apartment belonging to him after he got married to her and was entitled to an exemption from property appreciation tax, she will not be entitled to an exemption on this regarding the sale of her part of the apartment from her first marriage. This is because she and her new husband are regarded as one family unit. Exemptions are given for each family unit – and the second husband had used up the family unit’s exemption already as he sold his apartment after they had married and become one unit – within the four year period.
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