Exemption from capital gains tax on the sale of an apartment in Israel

Pinouye Binouye Cabinet Expert Comptable Dray & Dray

Pinouye - Binouye Project: Exemption from capital gains tax on the sale of an apartment in Israel

The Question: Exemption on Pinouye Binouye

A taxpayer owns an apartment in Israel, in which he resides.

He bought another apartment as part of a "Pinouye - Binouye" project. (Evacuation-construction)

According to the project's entrepreneur, the sale of the apartment handed over to him as part of the project will in future be exempt from capital gains tax on resale, eeven if the taxpayer owns another apartment.

Is this true? I've heard that if you own more than one apartment in Israel, you have to pay capital gains tax.

Is there a law concerning the taxation of apartments received in this type of project? Which would therefore exempt capital gains made on the project?


Article 49.26 of the Real Estate Taxation Act (Capital gains and acquisition). (hereinafter "the Act"):

A seller in a Pinouye Binouye project will be exempt from paying tax on the capital gain realized on the project. In addition to any other tax exemption to which he may be entitled. The right to such an exemption will not diminish or cancel any right to any other potential tax exemption.

This article is intended to prevent possible prejudice to a resident in an evacuation-construction project, who may have used the special exemption for the building permit, and therefore not taken advantage of the exemption for a residential apartment that would allow the resident to sell his new apartment.

With this directive, the legislator sought to encourage evacuation-build projects.

So that tenants are not afraid to enter into such agreements with contractors.

Be careful, however:

The purpose of article 49.26 is not to grant the apartment owner an exemption to which he is not entitled.

For example, if the owner of two apartments is no longer entitled to a capital gains tax exemption on the apartments. (Single apartment, meeting certain criteria)[/vc_column_text][/vc_column][/vc_row]



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Boruch Levenson - CPA

A native English speaker qualified in both Israel and the UK, Boruch cares for the English speaking clients.

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