As part of the tax bill for the year 2021, the Israeli government is preparing to make a second major reform concerning the sale of apartments in Israel.
The aim of this reform is to curb the rise in real estate prices in Israel.
It concerns the legal deadline for selling a second apartment in Israel, while benefiting from tax exemption on the capital gain realized.
Read also: the reform concerning rental income in Israel!
What is the tax period for selling an apartment in Israel and benefiting from an exemption?
In March 2016, a bill had been passed shortening the length of time property investors can hold two apartments without this being considered as holding them as an investment.
The aim of the reform was to shorten the period to 18 months, during which the apartment owner could sell one of the apartments and obtain exemption from capital gains tax: Mas Shevah. During the same period, the owner could also obtain a reduction in the acquisition tax payable on the purchase of the apartment.
Read also : Israel acquisition tax, simulate the amount of tax you have to pay! (Online simulator).
Reduced holding period for apartments: From 24 to 12 months.
This "interim order" expired this month (July 6, 2021) and the period during which 2 apartments can be held was automatically extended to 24 months.
However, the Treasury is not happy with the extension of the time limit, especially at the moment, in the assessment that such a long period in the context of rising housing prices allows some apartment owners to wait for the sale of the apartment in order to maximize the profits from the price rise.
According to the proposal, this leads to a large stock of "waiting apartments", which in turn will reduce the supply of apartments available on the market and lead to an increase in apartment prices.
Also, the Treasury has segmented "waiting apartments" and found that they are characterized by high household incomes that enable them to own the same 2 apartments for a long period of time.
Read also: How to optimize your rental income in Israel?
Our opinion on Israel's new tax reform:
- This reform targets a specific segment of the Israeli population.
Starting from a desire to control real estate prices in Israel, we believe that this reform must be accompanied by a "quantified" part.
An owner of 2 apartments in Hadera or Beer Sheva cannot be treated in the same way as an owner of 2 properties in Jerusalem or Tel Aviv.
Encouraging people to sell their apartments more quickly in Israel can be beneficial if the alternative market follows suit.
The returns on investment and the "high" potential latent capital gains may encourage owners not to sell these apartments within the allotted time if they do not receive a satisfactory offer.
As always, it would be a good idea for the government to introduce a transition period, to give owners of several apartments time to optimize their choice and make the right decision.
Contact us to optimize the sale of your apartment in Israel!
When selling an apartment, we can often avoid paying capital gains tax.
Or at least reduce the tax bill.
In many cases, the deduction mechanism allowed in Israel allows this type of income to be exempt from tax.
Our firm specializes in this type of operation, and we invite you to contact us to optimize your property income in Israel.