New Elections Will Extend High Property Tax on Investors, Tax Authority Warns
Translated & summarized from Ice by baba
Israel's Tax Authority Director Shai Aharonovich warned that additional elections will extend the high 8% property purchase tax on investors for at least three to four months. He stated that the market is at a critical point and that emergency measures might be needed if conditions worsen. Aharonovich also indicated that a property tax on vacant land is likely necessary to meet revenue needs, and proposed a 10% tax on rental income from the first shekel.
The story in 5 lines · by baba
- New elections will extend the 8% property purchase tax on investors for 3-4 months, warns Tax Authority Director Shai Aharonovich.
- The Tax Authority advocates for keeping purchase tax rates at 8% and 10% for investors.
- A property tax on vacant land is likely necessary to raise 30-40 billion shekels next year.
- A 10% tax on rental income from the first shekel is proposed, with a reporting obligation.
- The real estate market is at a critical juncture, requiring careful navigation.
Additional elections in Israel will likely extend the current high property purchase tax rate of 8% on investors for at least three to four months, according to Shai Aharonovich, Director of the Tax Authority. Aharonovich explained that due to the elections, the tax rates were not reverted to the lower 5% and 6% as scheduled, keeping the 8% rate in effect until February 10. He noted that a legal opinion suggests further elections would prolong this period. The Tax Authority, along with the Ministry of Housing and colleagues in the Treasury, advocates for maintaining the 8% and 10% purchase tax rates on investors, emphasizing the critical juncture of the real estate market.
Aharonovich acknowledged that reducing the purchase tax for investors to 3.5% as a temporary measure could stimulate demand, recalling past crisis responses in the early 2000s that included tax breaks. He stated that if the market continues to struggle in the coming months, emergency measures, similar to the past increase in purchase tax, would be considered. He recognized the difficult situation faced by contractors, stating the authority is listening and aims to help the sector navigate the current challenges, ensuring the construction industry remains viable due to positive demographics and the need for housing.
The impact of fewer apartment sales is already visible in tax revenues, affecting VAT and income tax collections. Aharonovich also believes a property tax on vacant land will be unavoidable, estimating a need for an additional 30-40 billion shekels next year beyond projected growth. He suggested this tax, akin to a wealth tax, is preferable to raising VAT or corporate tax. He expressed hope that a proposal for this tax, which was not passed in the 2026 Arrangements Law, will be reintroduced.
Regarding rental properties, Aharonovich proposed a 10% tax on rent from the first shekel, noting that the current exemption up to 5,700 shekels leaves a significant portion of taxable income outside the system, estimated at 1.5 billion shekels annually. Even if the tax from the first shekel is not implemented, he stressed the necessity of a reporting obligation for rental income.