Real estate tax law changes approved by the Knesset

The Knesset has formally approved several tax law changes affecting the real estate market in Israel, with the intent of cooling off the country's skyrocketing real estate prices. The tax law changes at this point, will be for 2 years as the Government attempts to slow down Investor purchases which over the last few years have accounted for nearly a third of all real estate transactions in Israel. The idea is to increase the supply of existing apartments and buildable land for new apartments. We mentioned the betterment tax changes in a previous article. Here are all of the changes brought by the vote:

1. The Purchase Tax on apartments purchased for investment, has been increased. The new purchase tax brackets will be 5% on properties to NIS 1 million, 6% on properties costing NIS 1 to 3 million and 7% on properties costing more than NIS 3 million.
2. Reduction of the Purchase Tax for individuals purchasing their primary residence. The new law exempts those who buy a property up to NIS 1.35 million from paying any Purchase Tax at all. Those who purchase in the NIS 1.35 to 1.6 million price range, will pay 3.5% and purchases over NIS 1.6 million will be taxed at 5%.
3. The Betterment Tax, which applies to the Capital gains achieved when selling a property that has appreciated, will be modified so that apartment owners who sell a property within 4 years of purchasing, will be exempt from the Tax. Previously, an apartment owner had to wait 4 years from the time of purchase before selling, in order to be exempt from the Betterment Tax. Also, those landowners, who sell land which they purchased prior to 2001, will pay a reduced rate of tax, 20% as opposed to 45%. Land sold for NIS 2.2 Million or less, will be exempt from the Betterment Tax.

The Knesset also decided that these changes would not be retroactive to January 1st of 2011 contrary to what had been previously suggested.

Source BPII