Israeli Court Rules Higher Property Tax on Partially Built Home

An Israeli District Court judge has ruled that two brothers must pay the full property acquisition tax on a duplex home purchased in Caesarea while it was still under construction. The buyers, David and Einat Sharvit and Avraham and Sarit Sharvit, had believed they owed 5% of the transaction's value, amounting to 650,000 shekels. However, the Tax Authority argued, and Judge Heri Kirsch of the Tel Aviv District Court agreed, that the tax should be calculated based on a higher value, resulting in an additional 430,000 shekels owed.

The ruling stems from the fact that the sellers, Yuval Aaron and Roni Biton, had committed to completing the construction of the house before selling the property to the Sharvit brothers. The Sharvit brothers subsequently entered into agreements with the construction companies, owned by the sellers' fathers, to finish the building. The court determined that because there was an existing commitment from the seller to complete the construction, the property qualified as a residential dwelling for tax purposes, even though it was not fully built.

The Tax Authority initially assessed the purchase value at 6.5 million shekels per family, later revising it to 7.5 million shekels per family to include future construction work. The Sharvit brothers' appeal to increase the tax was initially rejected by an appeals committee, and the Tax Authority's appeal to uphold the higher assessment is pending before the Supreme Court. The judge emphasized that the buyers acquired a package that included the land and the completion of construction, not just a plot for self-building.

Judge Kirsch cited several reasons for his decision, including the buyers assuming the sellers' contracts with the construction companies, the advanced stage of construction, and the close connection between the sale and the ongoing building work, further influenced by the familial ties between the sellers and the contractors. Members of the appeals committee, Zvi Friedman and Micha Lazar, concurred with the judge's findings. The Sharvit brothers were represented by lawyers Hananel Barhum and Mordechai Cohen, and the Tax Authority by lawyer David Ohana.