Revised Grant Regulations under the Third Apartment Bill

by Mirit Reif Adv

On January 5, 2017, the Knesset Finance Committee approved the revised regulations regarding the grant mentioned in the Third Apartment Tax Bill. The regulations apply for anyone selling an apartment from January 1, 2017.

As mentioned in our previous article on this subject, the Economic Arrangement Bill (Legislative Amendments to Implement the 2017-2018 State Budget) 5776-2016, was published by the Israeli government on December 29, 2016. Various tax amendments were made including the new Third Apartment Tax Bill. This Bill imposes a tax on anyone who owns 3 apartments and more, at a maximum amount of NIS 18,000 tax per year, per apartment.

In the event that one sells an apartment up until October 1, 2017, one will receive a grant up to NIS 85,000 (the amount was increased from the original NIS 75,000) upon certain conditions.  The purpose of the grant is in order to offset the betterment tax one would pay upon the sale.

The conditions for receiving the grant are:

  1. The sale needs to take place between the period of January 1, 2017 and October 1, 2017.
  1. The apartment was not sold to a relative and/or given as a gift.
  1. The buyer does not own an apartment, or owns one apartment but has declared that he is selling his apartment within 18 months of the purchase of the new one.
  1. The grant is limited to the lower amount of NIS 85,000, and the actual amount of tax due.
  1. In the event that one owns three apartments but is exempt from tax because the aggregated market value of all the additional apartments, (apart from the first and most expensive one), does not exceed NIS 1.15 million, the grant  will be limited to the lower of NIS 15,000 or 50% of the betterment tax.
  1. The person receiving the grant has not purchased a home between December 16, 2016, and December 31, 2020.  In the event that he purchases a home during this period he will have to return the grant.
  1. The grant is given upon each sale up to three apartments.

 

One can choose two options regarding how to receive the grant: 

  1. A refund of the actual amount after making the payment of the betterment tax or;
  2. A credit against the betterment tax due.

In addition the Knesset made some changes to the formula that determinates the tax due on the third apartment.    

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 circumstances.