{"id":353,"date":"2017-02-19T21:08:53","date_gmt":"2017-02-19T21:08:53","guid":{"rendered":"https:\/\/rk-law.co.il\/english\/\/?p=353"},"modified":"2022-04-06T09:32:17","modified_gmt":"2022-04-06T09:32:17","slug":"answers-5-questions-customers-ask-taxation-third-apartment-severe-warning-ownership-apartment-limited-company","status":"publish","type":"post","link":"https:\/\/rk-law.co.il\/english\/answers-5-questions-customers-ask-taxation-third-apartment-severe-warning-ownership-apartment-limited-company\/","title":{"rendered":"The answers to the questions all clients ask about taxation of the third apartment"},"content":{"rendered":"

The answers to the questions all clients ask about taxation of the third apartment (in Israel)\u00a0<\/span><\/strong><\/p>\n

Tali\u00a0Kessler, ADV. and Tal Rechnitz, ADV.<\/b><\/span><\/p>\n

Commencing on January 1st<\/sup>, 2017, the Law of the Third Apartment Taxation came into force.<\/p>\n

We have received a lot of questions from our clients about it. We will do our best to summarize for you the answers to the questions everyone asks:<\/p>\n

To whom does it apply?<\/strong><\/span><\/p>\n

The Law applies to an individual who, jointly with his basic family unit (spouse and children up to the age of 18), owns 249% or higher of the property rights of residential apartments.<\/p>\n

Assuming that your basic family unit owns 249% or higher, you will need to pay tax on the third apartment and on the fourth, the fifth, etc.<\/p>\n

If this is the case, you need to report to the Tax Authorities by March 2017, regarding the apartments you own and regarding the apartment\/s in respect of which you choose to pay the tax.<\/p>\n

Really, is it already in effect?<\/strong><\/span><\/p>\n

Yes. It is already in effect. Anyone who owns (jointly with his basic family unit) 249% or higher of residential apartments, needs to submit a tax report on all the apartments he owns by March 31st<\/sup>, 2017, and decide regarding which two of the apartments he has no intention to pay the tax.<\/p>\n

“Residential apartment” also includes an apartment which serves as an office or which is designated to residential use by its nature or pursuant to a\u00a0zoning plan\u00a0or which is actually used for residence.<\/p>\n

The tax must be paid in two installments: the first one is due by June 30th<\/sup>, 2017, and the second one is due by the December 31st<\/sup>, 2017.<\/p>\n

How is the tax calculated?<\/strong><\/span><\/p>\n

The tax is set at the rate of 1% of the property value, but not more than NIS 1,500 per month. The property value is determined by the Tax Authority.<\/p>\n

On the website of the Tax Authority there is\u00a0a friendly Calculator<\/span> enabling the calculation of the property value (according to a very complex algorithm) and of the tax deriving from it.<\/p>\n

It is important to know that the property value is determined by a very complex formula which combines vast statistical data, however in practice real value and the calculated value can be different.<\/p>\n

What can be done to avoid \/ reduce the tax liability?<\/strong><\/span><\/p>\n

Sell one or more of the apartments or give it or them as a gift to the children (assuming that they don\u2019t have more than one apartment themselves).<\/p>\n

Before transferring the apartment\/s to your children, one should give more thought \u2013<\/p>\n