Lapid to expand zero VAT to Tama 38 projects

Minister of Finance Yair Lapid proposed today amending the zero VAT bill to include residential projects under National Outline Plan 38 or Tama 38 (earthquake retrofitting). The amendment appears in a draft of the bill published today for public comments. Lapid accepted a recommendation by the Israel Tax Authority and Israel Builders Association to include National Outline Plan 38 projects in the zero VAT plan. "The change will allow service providers in these areas to deduct the inputs tax in invoices issued to them for retrofitting services, thereby increasing the worthwhileness of these projects," said the Tax Authority.

The Tama 38 plan, first introduced in 2005, allows building owners to strike deals with contractors to give them additional building rights in exchange for reinforcing older buildings against earthquakes. The Pinui Binui program creates a framework for tenants of older buildings to be rehoused while their homes are demolished and rebuilt, with the contractor receiving building rights for apartments he can sell. Under the new proposal, work done under either plans would benefit from exemption from the 18% VAT either for construction or demolition work.

The treasury proposal does not grant however home buyers in the urban renewal schemes any kind of VAT exemption, although those who qualify for the home-buyer VAT exemption can apply it to properties they purchase through the two urban renewal programs. That program is limited to couples with at least one child or are over age 35, and have served in the army or civilian national service. They are entitled to buy a home worth up to 1.6 million shekels ($460,000), while those who don’t meet those criteria can buy a home worth up to 950,000 shekels.