August 12, 2016

On Friday, August 12, 2016, the Israel budget for years 2017 and 2018 was approved. Included in the budget, was the proposal by the Ministry of Finance to impose tax on owners of three or more apartments. If this proposal is approved as a bill, consequently, starting January, 1, 2017, a new annual tax will be imposed on owners of three apartments or more. 

The tax will not be imposed on the two first apartments, but each additional apartment will have a tax amounting to 1% of the apartment's value, up to a ceiling of NIS 1,500 per month (18,000 per year). The apartment's value per square meter will be determined by the Ministry of Justice Land Appraisal Department, according to the apartment’s location.

The apartments' owners will be able to choose which properties will be subject to this tax, but if they refrain from choosing, the government will impose the tax on the cheaper apartments, according to Tax Authority data. A person controlling one third (33%) of the ownership right to an apartment will be considered an apartment owner, and a person and his spouse (and their children up to the age of 18), will be regarded as one owner.

The Ministry of Finance believes that the new tax will present an incentive for apartment owners to sell their properties, thus increasing apartment supply in the second hand market and exerting pressure to lower real estate prices.

The bill still needs to reach its final Knesset approval via passing its second and third readings, and it is expected to draw a lot of political opposition.

The content of this article is intended to provide a general guide to the subject matter and is not a substitute for legal consultation. Specific legal advice should be sought in accordance with the particular circumstances.