Sale of an apartment in France by an Israeli resident: Understanding tax laws
An Israeli resident who has sold an apartment in France that he or she bought 20 years ago may face a number of tax issues. Under French tax laws, the sale was not taxable in France, but the taxpayer is required to keep up to date with the Israeli tax authorities.
In this article, we'll look at some of the problems taxpayers may face when selling an apartment in France.READ ALSO: TAXES IN ISRAEL: TAXES ON PROPERTY INCOME
Do I have to pay taxes in Israel on the sale of a property in France?
Article 13.1.a of the Convention between the Government of the State of Israel and the Government of the French RepublicThe Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital (hereinafter referred to as "the Convention") grants the State of origin an initial right of taxation on capital gains arising from the sale of real estate.
And the owner's state of tax residence may also impose a tax.
That is, in this case, the primary tax law is that of France, and the State of Israel may also impose capital gains tax on the sale.
Of course, we will apply a credit for the tax paid in the country of origin, if you have paid in France.
The capital gain taxable in Israel will be taxed at a maximum of 25%.
However, there are many ways to reduce this effective rate.
We also point out that the taxpayer will only be required to pay tax on the actual (non-inflationary) capital gain - see answer to question 3 below.
Good to know!
A pro rata calculation of the number of years held will be made for an Ole Hadash who sold the property after the end of his 10-year exemption.
If this applies to you, don't hesitate to contact us to save thousands of shekalim in taxes.
Is it possible to deduct expenses incurred by the sale?
Commissions and interest paid on loans taken out to purchase the property can be deducted to determine the taxable capital gain.
It is important to note that the taxpayer is also entitled to deductions for depreciation and other expenses (such as legal fees, brokerage fees and, under certain conditions, foreign travel expenses related to the sale of the property).
Tax consequences of currency conversion
When you sell a property in France and the funds are converted into a foreign currency, this can have tax consequences linked to inflation.
In Israel, currency conversion can result in capital gains or losses. in nominal valueThis can lead to substantial inflation allowances.
It's important to understand the tax implications of currency conversion to avoid tax problems and maximize your tax situation in Israel.
Do you have a question?
In a nutshell:
In some cases, waiting a few months or years may make a previously non-taxable asset taxable.
We therefore advise you to sell during the first 10 years of your aliyah to benefit from the exemption..
As each case is different, we advise you to consult a professional if you have any questions.
If you need support for your tax return to the Israeli tax authorities, you know who to contact!
Your questions - our advice
- How will an inheritance be taxed?
- Does this law apply to gifts of apartments between relatives?
- Does this law apply to people who have Israeli nationality but are not permanent residents of Israel?
- What happens if I have no other apartment in Israel? Am I exempt from this sale?
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