Real estate taxation · Implementation Instruction
Section 39A: Conditions under which a Loan Will Not Be Deemed a Loan "from a Relative": 7/2008
Summary
The instruction determines when a loan that passed through a "relative" will not be deemed a loan from a relative for the purposes of section 39A of the Law, which allows financing expenses in respect of a loan for the purchase or improvement of the right in real estate to be deducted from the gain, provided that it is not from a relative. Where a parent company takes a loan and serves merely as a "conduit" for transferring it to a subsidiary or sister company, which repays it on the same terms and dates (Back to back) and actually complies with this throughout the loan period, the interest expenses will be allowed as a deduction, and the same applies to loans between relatives that are not companies. If the receiving company repaid the principal and interest only upon the sale of the property, the interest expenses will not be allowed, and the instruction details tests such as transfer of the full amount, the date of transfer, recording in the books and matching of the repayment terms.
The summary was written by the office and reflects the instruction as of its publication date. The binding text is the official Hebrew publication, and the instruction may have been updated or affected by later legislation and case law. The English title and summary are an unofficial translation.
Publication details
- Type
- Implementation Instruction
- Number
- 7/2008
- Publication date
- 4.5.2008
- Topics
- Betterment tax
- Sections of the Law mentioned
- 39א
Official document
Source: The publication on the Israel Tax Authority website (gov.il, Hebrew)
Suggested citation
Israel Tax Authority, Implementation Instruction 7/2008, "Section 39A: Conditions under which a Loan Will Not Be Deemed a Loan "from a Relative": 7/2008" (4.5.2008) [Hebrew]
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