Israel Tax Authority Implementation Instructions on Real Estate Taxation

Real Estate Taxation Professional Position Paper No. 06/26, Israel Tax Authority. Re: Application of Section 19(3a) of the Real Estate Taxation Law to Transactions in which the Purchaser Assumes a Tax Liability Imposed by Law on the Seller

Professional Position Paper 06/26 of the Israel Tax Authority addresses section 19(3a) of the Real Estate Taxation Law, under which, in the sale of a right that is conditional upon a future condition of increased utilisation possibilities under a plan, where the consideration was affected by this and is not wholly in money, the "date of sale" is the date on which the plan is approved. The Authority's position is that the section also applies to "net transactions", in which rights are sold in consideration for construction services and the purchaser assumes tax liabilities imposed on the seller, such as betterment tax, levies or fees to local authorities, and therefore the date of sale will be the date on which the plan is approved. The date of sale determines the deadline for the declaration under section 73 (30 days) and for payment under section 90A (60 days), and in other cases not mentioned, the professional department of the Real Estate Taxation Division should be consulted.

Real Estate Taxation Position Paper No. 02/2026, Israel Tax Authority, on: Application of Section 49G of the Real Estate Taxation Law to the Sale of a Right in a Replacement Residential Unit in Urban Renewal Transactions Following Amendment 96 to the Law

The Position Paper provides that in urban renewal transactions of the evacuation and reconstruction type or a reinforcement plan on the demolition track, the sale of the right to the replacement residential unit after the date of sale and before completion of construction of the apartment is not subject to section 49G of the Real Estate Taxation Law, because on the date of sale all the building rights are sold to the developer. Under Amendment 96 to the Law, which entered into force on 18/11/2021, the right to the replacement residential unit is deemed a "residential apartment" for the purposes of betterment tax and purchase tax even before completion of its construction, and therefore the seller may request an exemption under Chapter Five 1 of the Law or a beneficial linear calculation under section 48A(B2), subject to meeting the definition of a "qualifying residential apartment". In a sale after completion of construction, the application of section 49G will be examined according to the planning status at the time of sale.

Real Estate Taxation Implementation Instruction No. 2/2026: Extension of Deadlines Following the "Roaring Lion" War

As at the date of its publication (March 2026), the instruction clarifies the extension of periods under the Real Estate Taxation Law pursuant to the Law on the Extension of Periods and Postponement of Dates, following the "Roaring Lion" war. The "second determining period" is 28.2.2026 to 31.5.2026, and a period under sections 9(c1c)(2)(b), 9(c1c)(2)(b1)(2)(b), 9(c1c)(4)(b), 49C(1) and 49E(a)(2) and (4) that falls within it, even by a single day, is extended by three months from the later of the end of the second determining period (that is, until 31.8.26) and the end of the original period. The extension applies, among other things, to the deadline for selling a previous apartment for the purpose of the single apartment purchase tax brackets, to the exemption from betterment tax for a replacement apartment under section 49B(2) and to section 49E, and the instruction includes calculation examples. Lawyers and taxpayers are requested to state in the self-assessment and in requests to amend an assessment that the deadlines are subject to the Law on the Extension of Deadlines.

Relief for the Public in the Real Estate Taxation System Due to the Security Situation: "Roaring Lion"

As at the date of its publication (March 2026), the letter sets out relief in real estate taxation due to the security situation during Operation "Roaring Lion". Objections whose statutory filing deadline under section 87(a) of the Law fell between 28.2.26 and 14.4.26 were postponed to 15.4.26 without the need for an individual request, and in transactions whose date of sale is from 1.1.26 onwards, the period between 28.2.26 and 15.4.26 will not be included in the calculation of the fine for failure to file a declaration under section 94A, which amounts to 310 ₪ (as of 2026) for every two weeks of delay. The relief does not reduce interest, linkage differentials or fines for late payment. It is further noted that under a legislative amendment approved by the Knesset on 25.3.26, home upgraders whose period for selling their old apartment fell, even for a single day, between 28.2.26 and 31.5.26 may sell it by 31.8.26 or within 3 months of the original deadline, whichever is later.

Real Estate Taxation Position Paper No. 03/2026, Israel Tax Authority. Re: Sale of an apartment received by inheritance under section 49B(5) of the Real Estate Taxation Law, in respect of which an agreement was signed in an urban renewal transaction

Position Paper 03/2026 clarifies the exemption from betterment tax under section 49B(5) of the Law on the sale of an apartment received by inheritance that is part of an urban renewal transaction (evacuation and reconstruction and TAMA 38). Where the inheritance preceded the date of sale to the developer, the heir may use the exemption on the sale of the replacement apartment, subject to its conditions; where the inheritance occurred after the date of sale and before completion of construction of the replacement apartment, eligibility depends on the application of Amendment 96 (date of sale after 18.11.2021), and an inheritance before the date of application will not qualify for the exemption. The position is limited to urban renewal transactions in which one apartment is received under a full exemption under Chapter Five 4 and Chapter Five 5.

Real Estate Taxation Implementation Instruction No. 1/2026: Update of Amounts and Freezing of Amounts in the Real Estate Taxation Law and the Purchase Tax Regulations

The Implementation Instruction sets out the amounts in the Real Estate Taxation Law and the Purchase Tax Regulations that were updated for 2026 (relief for a purchaser of an agricultural farm, fines for failure to file a declaration of 310 ₪ and a notice of 250 ₪ under section 94A(a), and fees), for the period 16.1.2026 to 15.1.2027. It also sets out the amounts frozen under the Arrangements Law for 2025: for a single apartment there is no tax on the portion of the value up to 1,978,745 ₪ (section 9(C1C)(3)), and for an apartment that is not a single apartment, 8% up to 6,055,070 ₪ and 10% above it under the temporary provision in section 9(C1F), in force until 31.12.2026. With regard to betterment tax, the amounts noted include, among others, the exemption ceiling under section 49A(A1) of 5,008,000 ₪ until 31.12.2027, and the amounts under sections 49E and 49G and for the surtax.

Professional Position Paper No. 04/2025, Israel Tax Authority. Field: Real Estate Taxation Law. Subject: Clarification regarding the tax exemption on rent received in urban renewal transactions

Position Paper 04/2025 clarifies that the rent paid by the developer to residents in an evacuation and reconstruction or TAMA 38 project under the demolition and construction track (TAMA 38/2), for the period from the demolition of the apartment until possession of the replacement apartment is received, is included in the exemption from betterment tax under sections 49KB(a)(1) and 49LC1(a)(1) of the Law. In the position of the Israel Tax Authority, the exemption does not depend on the use the seller made of the apartment on the eve of the transaction, even if it was let to a third party. Accordingly, these payments need not be reported as income chargeable to income tax and no tax is to be withheld from them at source.

Real Estate Taxation Implementation Instruction No. 1/2025: Update of Amounts and Freezing of Amounts in the Real Estate Taxation Law and the Purchase Tax Regulations under the Economic Efficiency Law (Legislative Amendments for Achieving the Budget Targets for Budget Year 2025) (Freezing of Tax Updates and Surtax), 5785-2024

Amounts updated The amounts in this instruction were updated by later instructions. Next update in the database: 1/2026

As at its publication date (January 2025), the instruction sets out the amounts in the Real Estate Taxation Law and the Purchase Tax Regulations after the Arrangements Law for 2025 froze their update in tax years 2025 to 2027, alongside amounts that were updated. Purchase tax brackets for a single apartment under section 9(c1c)(3) from 16.1.2025: no tax up to 1,978,745 ₪, and above that amount 3.5%, 5%, 8% and 10% according to the brackets; and for a person purchasing an apartment that is not their single apartment, under the temporary provision in section 9(c1f), which was extended until 31.12.2026, 8% up to 6,055,070 ₪ and 10% above it. The exemption ceiling under section 49A(a1) stands at 5,008,000 ₪ and will be in force until 31.12.2027, and the instruction also sets out the amounts under sections 49E and 49G, the relief for a new immigrant and for a purchaser of an agricultural farm, the fine for failure to file a declaration (300 ₪) or a notice (240 ₪), the fees and the additional tax under section 121B of the Ordinance.

Supplement No. 1 to Instruction No. 3: "Capital Declaration: Supporting Document for an Improvement Expense" in Implementation Instruction 28/87, Betterment Tax

The supplement to Implementation Instruction 28/87 directs the Real Estate Taxation offices on how to handle a request to deduct from the gain the expenses of building an apartment on the land, on the sale of a qualifying residential apartment that is liable to betterment tax, where the seller has no invoices, receipts or capital declaration. Under section 39 of the Law, the seller attaches a "Report on a Construction Expense Without Supporting Documents" form (Appendix A), and the Director estimates the construction costs on the basis of accepted price lists, after being satisfied that the seller incurred the expense and that it was not claimed under the Income Tax Ordinance. A seller who presents a works agreement and documentation of payments will be allowed the expense requested for construction before 1/1/2014, and for construction from that date onwards without VAT and without a contractor's profit at a rate of 15%. A seller who does not meet the burden of proof will be allowed a deduction according to a price list without VAT and without a contractor's profit, and in certain cases only 2/3 of the expenses or no deduction at all, depending on whether an accountant's confirmation is provided that the expense was not and will not be claimed for income tax.

Real Estate Taxation Implementation Instruction No. 2/2025: Guidance on Regulation 2(1A) of the Purchase Tax Regulations

The Instruction clarifies Regulation 2(1A) of the Purchase Tax Regulations, which allows a refund of one sixth of the purchase tax, so that the rate stands at only 5%, on the purchase of land subject to a plan permitting the construction of at least one residential apartment, if a building permit for a residential apartment was obtained within 24 months of the date of sale. The regulation also applies to land purchased as inventory and to land sold with a valid building permit, but not to the sale of a right in a real estate association nor to the purchase of apartments from a construction company; an apartment that the purchaser intends to demolish will be deemed land only if the Director is so persuaded, and an intention to demolish is not sufficient. An excavation and shoring permit will be deemed a building permit under the conditions set out in Position Paper 4/24, and for land with mixed designation the refund is proportionate to the part designated for residential use. The 24-month period cannot be extended under section 107 of the Law, and after the permit is obtained an application to amend the assessment must be filed under section 85 of the Law.

Professional Circular No. 02/2024 (Real Estate Taxation). Subject: Legislative Amendments, the Arrangements Law

Professional Circular 02/2024 sets out amendments to the Real Estate Taxation Law made under the Arrangements Law published on 31.5.2023. Among other things: from 1.1.24 a "shell apartment" is deemed a residential apartment for purchase tax purposes only (section 9); cancellation of the beneficial linear calculation, under certain conditions, for an apartment whose construction was completed after 31.12.2030; a graduated temporary provision from 1.6.23 to 31.12.27 for the sale of land purchased before 7.11.2001 for the construction of at least 8 housing units. It also provides for shortening the period for selling the old apartment of home upgraders from 24 to 18 months (sections 9(c1c)(2)(b) and 49C(1)), in force from 1.6.23 for two years, and authorisation to prescribe online reporting under section 76A.

Real Estate Taxation Implementation Instruction No. 3/2024: Regulation 11 of the Purchase Tax Regulations, Updated Guidelines

The instruction updates the guidelines regarding regulation 11 of the Purchase Tax Regulations, which grants a reduced rate of purchase tax to a disabled person, a blind person, an injured person and a family member of a soldier who fell in action, on the purchase of a right in real estate for their housing, subject to proof of actual residence. Among other things, the relief is also granted to parents who purchase an apartment because of the needs of a disabled minor or a disabled adult who has been declared legally incompetent, with court approval; on the purchase of a single apartment worth up to 2.5 million ₪ there is no tax up to the amount of the exempt bracket and ½ percent above it, and above 2.5 million ₪, ½ percent from the first shekel, and the ½ percent rate may be granted to a person only twice. It is further clarified that the eligibility age of an orphan was raised from 40 to 50 in the amendment of 23.8.23, that common-law partners are both entitled to the relief without a requirement of marriage, and that on the purchase of land the tax difference is frozen and examined after 3 years.

Professional Position Paper No. 04/2024, Israel Tax Authority, in the Field of: the Real Estate Taxation Law, on: Regulation 2(1A) of the Purchase Tax Regulations

The Position Paper deals with Regulation 2(1A) of the Purchase Tax Regulations, under which the purchaser will be refunded 1/6 of the purchase tax paid at the rate of 6%, if a permit to build at least one residential apartment was obtained no later than the end of 24 months from the date of sale. According to the position, an excavation and shoring permit for a residential building will be deemed a building permit for the purposes of the regulation, but only subject to cumulative conditions: a large-scale project of planning complexity, land purchased in a tender with binding timetables, an application for the main permit filed within the deadline and within a reasonable time, a splitting of the permit by decision of the local committee, and works commencing immediately and carried out continuously. This does not extend the deadline in the regulation, and the position is an exception that will be granted only in special cases.

Professional Position Paper No. 03/2024, Israel Tax Authority. Field: Real Estate Taxation Law. Subject: Sale of building rights in a TAMA 38/2 transaction and purchase of construction services from the contractor for cash

Israel Tax Authority Professional Position Paper 03/2024 addresses apartment owners in a TAMA 38/2 transaction (strengthening by way of demolition) who sell to the developer only part of their building rights. For the part sold, the owners are entitled to a proportional exemption from betterment tax, and for the balance of the rights they may be regarded as ordering construction services from the developer for full monetary consideration, which do not necessarily constitute a "sale" of a right in real estate. The Real Estate Taxation Director will examine the reasonableness of the transaction, among other things against the customary combination rate in the area, the rate of sale of the other residents and the cost of customary construction services in the market. If it is determined that the payment to the developer is a sale of a right in real estate and not a payment for construction services only, the purchase tax will be calculated as for the purchase of a built residential apartment under section 9 of the Law.

Real Estate Taxation Implementation Instruction No. 1/2024: Extension of Deadlines Following the Swords of Iron War

As at the date of its publication (January 2024, with a supplement from April 2024), the instruction clarifies the Law on the Extension of Periods and Postponement of Dates (Temporary Provision, Swords of Iron), which extended deadlines under the Real Estate Taxation Law; the "determining period" is 7.10.23 to 7.1.24. Deadlines that began before the end of the determining period and ended within it or in the two months following it, such as the deadlines for an objection, an appeal, issuing an assessment and amending an assessment, were extended by 3 months, but the extension does not apply to the deadlines for the declaration under section 73 or to the deadlines for payment of the tax. The periods for selling a previous apartment for the purpose of the single apartment purchase tax brackets, for the exemption under sections 49B(2) and 49E, and for becoming an Israeli resident, were extended to the later of 3 months from the end of the determining period (7.4.24) and 3 months from the original deadline, if at least one day of them fell within the determining period. The supplement to the instruction applies a similar extension to the 24-month period for obtaining a building permit under regulation 2(1a) of the Purchase Tax Regulations.

Obtaining an Identification Number for Foreign Residents for the Purpose of Reporting a Transaction under the Real Estate Taxation (Capital Gain and Acquisition) Law, 5723-1963

A notice to representatives that from 1.1.2023, an individual who does not hold an Israeli identity card and who needs an identification number to report a transaction under section 73 of the Law (within 30 days from the date of sale) shall submit an online application in the "Application for Registration and Allocation of Entity Numbers" system, and the average handling time is approximately three working days. Email requests for individuals will no longer be handled from that date. For a ward or an absentee, and for a corporation not registered in Israel, the email addresses detailed in the notice should be contacted.

Change in the Purchase Tax Brackets for Purchasers of an Additional Residential Apartment: Supplement No. 1 to Real Estate Taxation Implementation Instruction No. 1/2021

As at the date of its publication, the supplement explains that within Amendment 98 to the Real Estate Taxation Law, the purchase tax brackets were changed on the purchase of a residential apartment that is not the purchaser's single apartment. Under section 9(c1f) of the Law, as a temporary provision, on such purchases, and on purchases by foreign residents and by a person who is not an individual, from 28.11.21, the tax is 8% on the portion of the value up to 5,348,565 ₪ and 10% on the portion exceeding it, in amounts set until 15.1.2022 that will be updated under section 9(c2). It was further noted that at this stage there is no change in the brackets for a purchaser of a single apartment.

Real Estate Taxation Implementation Instruction No. 2/20: Emergency Regulations (Novel Coronavirus): Postponement of Periods and Deadlines 2/20

As at the date of its publication, the Instruction clarifies the Emergency Regulations (Novel Coronavirus) published on 27.3.2020, under which the period from 22.3.20 to 31.5.20 will not be counted with respect to deadlines under the Real Estate Taxation Law expiring from 22.3.20 to 31.7.20. The postponement applies, among others, to applications to reduce an advance payment (section 15), notices under sections 49J, 49U, 49LB2 and 75A, assessment deadlines (section 78), amendments of assessments (sections 85 and 85A), objections (section 87) and appeals (section 88). The regulations do not apply to the deadline for filing the declaration under section 73 or to the deadlines for payment of the tax.

Addendum No. 1 to Real Estate Taxation Implementation Instruction 4/2011

As at its publication date (November 2019), the addendum changes the handling of a request to calculate betterment tax by way of spreading, as set out in Real Estate Taxation Implementation Instruction 4/2011. A request for spreading of the real gain filed with the annual return for the tax year in which the transaction took place, or after that return was filed, will be handled by the assessing officer, even if it is a first request, and will not be transferred to the Real Estate Taxation Director. A request filed with the Real Estate Taxation Director as part of the self-assessment, or as a request to amend an assessment as long as no annual income tax return has been filed, will be handled by the Real Estate Taxation Director, subject to the limitation period under section 85 of the Law.

Handling a Request to Calculate Betterment Tax by Way of Spreading: Amendment of Implementation Instruction 4/2011

As at the date of its publication (November 2019), the notice updates the handling of a request to calculate betterment tax by way of spreading, in accordance with Supplement No. 1 to Real Estate Taxation Implementation Instruction 4/2011 published on 19/11/19. From that date, a request for spreading of the real gain that was submitted with the annual return for the tax year in which the transaction took place, or after it, will be handled by the assessing officer, even if it is a first request. A request submitted to the Real Estate Taxation Director as part of the self-assessment, or as a request to amend an assessment before an annual return was filed, will be handled by the Real Estate Taxation Director subject to the limitation period under section 85 of the Law, and the final assessment will be made by the assessing officer upon the filing of the annual return.

Implementation Instruction 2/2019: Purchase Tax Rate on the Purchase of a Residential Apartment Replacing a Single Residential Apartment in a Purchase Group Whose Construction Has Not Yet Been Completed

Real Estate Taxation Circular 2/2019 explains Amendment 93 to the Law, which added section 9(C1C)(2)(B1): an individual whose single apartment was purchased in a purchase group whose construction has not yet been completed, and who bought a new residential apartment, is entitled to the purchase tax brackets for a single apartment if he sells his rights in the apartment in the group within 18 months of the date of completion of its construction. The track applies where the new apartment was purchased after 4 years from the purchase of the apartment in the group and construction had not begun or the Director was persuaded that there was a material delay beyond the purchaser's control, or after 6.5 years if possession had not yet been delivered, and provided that the purchaser did not have an additional apartment. The provisions do not apply where the old apartment was purchased from a contractor; they also apply to purchases prior to 28.6.18, subject to the limitation period under section 85, and the tax difference is frozen for a period of 3.5 years from the date of purchase of the new apartment.

Real Estate Taxation Implementation Instruction No. 2/2018: Amendment 89 to the Real Estate Taxation Law

As at the date of its publication (June 2018), the Instruction explains Amendment 89 to the Real Estate Taxation Law, which makes it possible to obtain tax clearance certificates for registration in the land registers before the assessment process has been completed, in sales from 30.5.2018. Three tracks were established: a purchase tax certificate under section 15(i) upon payment of an advance on account of betterment tax, in which the period was shortened from 90 to 60 days; a betterment tax and purchase tax certificate on the sale of a qualifying residential apartment exempt under Chapter Five 1, under section 16(a)(2A), subject to cumulative conditions such as filing the declarations on time and the absence of a future condition; and a track of "compliance with conditions set by the Director" as a temporary provision until 30.4.2020. A certificate issued under these tracks is accompanied by a note registered in the land registers under section 16(g), which does not prevent transactions and is deleted after the Director confirms that the transaction is exempt or that the tax has been paid.

Duty of Online Reporting of Real Estate Transactions

As at the date of its publication (October 2017), the document explains that from 1.12.17 every declaration under section 73 of the Real Estate Taxation Law and the accompanying documents are submitted online: lawyers through the Shevach.Net representatives' system, and unrepresented persons after identifying themselves for the online services on the Israel Tax Authority website. Two exceptions were set: a lawyer who had reached the age of 66 on 15.10.2017 may submit on designated forms, and an unrepresented taxpayer who cannot attend the Authority's offices due to physical limitations or a stay outside Israel may request the Director's approval for non-online reporting. The document notes that the duty to declare is within 30 days from the date of sale, and includes questions and answers on the manner of submission, attaching documents, a declaration by a foreign resident and payment of the self-assessment.

Supplement No. 2 to Real Estate Taxation Implementation Instruction No. 2013 \ 5: Alternatives for Proving the Absence of a Residential Apartment in the Country of Residence of a Seller Who Is Not an Israeli Resident for the Purpose of Entitlement to an Exemption under Chapter Five 1

The Supplement deals with a foreign resident who sells a qualifying residential apartment and requests an exemption from betterment tax under Chapter Five 1, which section 49A(a) of the Law makes conditional on his having no residential apartment in his country of residence and on producing a certificate to that effect from the tax authorities there. Where the tax authorities in the country of residence do not issue such a certificate, the seller may prove this by alternative evidence: a lease agreement and a municipal certificate that he pays taxes as an occupier and not as an owner, a certificate from the tax authority in the country of residence that he did not report income from rent, or his tax returns, and an affidavit under the Evidence Ordinance that he has no additional residential apartment there. In a federal country or one divided into districts, the certificates must refer to all the states or districts in it, and residents of countries that issue a certificate continue to be required to produce the certificate of the tax authorities themselves.

Real Estate Taxation Implementation Instruction No. 2.2016: Amendment No. 85 and Temporary Provision

As at the date of its publication (June 2016), the Instruction explains Amendment 85 to the Real Estate Taxation Law and the temporary provision established in it. The temporary provision shortened the period within which a purchaser of a replacement apartment must sell his old apartment, which was his single apartment, in order to benefit from the purchase tax brackets for a single apartment and from the single apartment presumption for the purposes of the exemption from betterment tax; for an apartment purchased from a contractor the period is also counted from the date of delivery, whichever is later. It was further provided that an apartment received by inheritance, in which the seller's or purchaser's share does not exceed one half, will not be counted among the apartments for the purposes of the single apartment exemption and the purchase tax brackets, but such an apartment cannot be sold with an exemption if the seller sold another apartment with an exemption while holding it.

Real Estate Taxation Implementation Instruction 5/2013: The Reform in the Taxation of Residential Apartments

As at the date of its publication (December 2013), the instruction sets out the reform in the taxation of the sale of qualifying residential apartments established in the amendment to the Real Estate Taxation Law within the Law for Changing National Priorities, including the transitional provisions. The main points of the reform: the exemption from betterment tax is retained for a person selling their single apartment, the exemption granted to owners of several apartments once every four years was abolished, a foreign resident is entitled to the exemption only if they present confirmation from the tax authorities in their country of residence that they have no apartment there, and an exemption ceiling was set for luxury apartments above which the value is liable to tax. On a taxable sale of an apartment purchased before the transition date, the real gain is calculated on a linear basis, so that the portion attributed to the period up to the transition date is exempt and the portion after it is liable to tax. The instruction also details the new conditions for the single apartment exemption, the cooling-off periods for an apartment received as a gift, the exemption for those upgrading their housing and the new declaration forms.

Real Estate Taxation Implementation Instruction 3/2013: Cases Deemed the Purchase of a Single Residential Apartment for Purchase Tax Purposes

The implementation instruction sets out special cases in which the purchased apartment will be deemed a single apartment for the purposes of the purchase tax brackets under section 9(c1a) of the Law: a purchaser who has no apartment and simultaneously purchases several apartments for the first time (the benefit applies to one apartment of their choice), the purchase of an additional share in a single apartment part of which is already owned by the purchaser, and the expansion of a single apartment by purchasing an adjacent apartment that will be merged with it. In the case of an expansion apartment, the assessment will initially be issued as for a second apartment and the tax difference will be frozen until the end of the adjustment period, and if the adjustment is proven, the assessment will be amended.

Real Estate Taxation Implementation Instruction No. 02/2013: Taxation of a Purchasing Group

The implementation instruction sets out the procedure for handling betterment tax and purchase tax in purchasing group transactions, following an amendment to the Law that defined "purchasing group", "organising entity" and "contractual framework". A member of a purchasing group is liable to purchase tax according to the sale value of the built property and not of the land, and the seller of the land to the group is liable to VAT, so that a betterment tax clearance for registration will be given only with the VAT Director's confirmation of payment of the tax or a guarantee. The instruction details the tests for identifying a purchasing group, the manner of determining the sale value and the taxation of the organising entity.

Increasing the Supply of Residential Apartments: 06/2011

As at the date of its publication, the Instruction explains the Temporary Provision Law for Increasing the Supply of Residential Apartments, 5771-2011: reduced purchase tax brackets for a single apartment (no tax up to 1,350,000 ₪) and increased brackets for an investment apartment (5% to 7%) for purchases from 21.02.11 to 31.12.12. It sets out two additional exemptions from betterment tax on the sale of a qualifying residential apartment from 01.01.2011 to 31.12.2012, and an exemption up to three times for a residential apartment that is not qualifying from 01.08.2011 to 30.06.2013, with a ceiling of 2,200,000 ₪ and conditions such as a sale not to a relative. It further explains a reduced betterment tax rate on the sale of land for the construction of at least 8 apartments, conditional on completion of construction within 36 months, and the extension of the period in section 49B(1) from 4 to 8 years in Amendment 71.

Scope of Application of the Family Unit Presumption - 05/2011

Implementation Instruction 5/2011 implements the Palm ruling and clarifies that the family unit presumption, for the purposes of purchase tax on a single apartment and of counting exemptions from betterment tax, applies only from the date on which the family unit was formed and to purchases and exemptions during the marriage. In the position of the Israel Tax Authority this also applies in the absence of a property agreement, but an apartment purchased during the marriage in the name of one spouse will also be attributed to the spouse who has an apartment from before the marriage. On the sale of a jointly owned apartment, an exemption used by a spouse before the marriage is counted only in respect of that spouse's share, and after the dissolution of the family unit, exemptions used by the other spouse are not to be counted against a spouse.

Division of Estate Assets among Heirs: Section 5(c)(4) of the Real Estate Taxation Law: 07/2010

The implementation instruction presents cases examined in tax rulings regarding section 5(c)(4) of the Law, which provides that a first division of estate assets among heirs is not deemed a sale, provided that no consideration was given from outside the estate assets. Among other things, it was determined that granting use and fruits to a surviving parent is not a first division, that a division in kind not in accordance with the shares in the inheritance order is possible if there is a reasonable explanation for the value gaps, and that a division after decades of actions in the assets does not qualify for the relief. It was further clarified when two estates of spouses or of a child and their parent will be deemed one estate, and when a division of assets received on the liquidation of a real estate association whose shares were inherited will be deemed a first division.

Holiday Apartments: Real Estate Taxation Aspects - 05/2010

The instruction provides that a holiday apartment which, under the plan, the building permit or the purchase agreement, must be available to the public for holiday purposes for most of the year is not a "residential apartment" under the Law, relying, among other things, on the Supreme Court judgment in the Herzliya Marina matter. Accordingly, its sale is not eligible for the exemptions under Chapter Five 1, its purchase is subject to purchase tax at a rate of 5% and not according to the brackets for a residential apartment, and a person holding a residential apartment and a holiday apartment will not be regarded as holding more than one residential apartment. Exceptions: a seller of a holiday apartment who, upon its purchase, was charged purchase tax as for a residential apartment may request an exemption, but the purchaser from that seller will pay 5%; and apartments in older projects that the authorities classified as residential for municipal tax (arnona) purposes, as well as "marked apartments" in which the court approved residential use, will be deemed residential apartments.

Chapter Five 5: Exemption on the Sale of a Right in Real Estate Whose Consideration Is Affected by Building Rights under TAMA 38: 10/2009

As at the date of its publication (2009), the Instruction explains Chapter Five 5 of the Real Estate Taxation Law, added by Amendment No. 62, under which the sale of building rights by virtue of TAMA 38 is exempt from betterment tax and from sale tax (section 49LC) if the consideration was given in construction services under the reinforcement plan and the building was actually reinforced. The exemption does not apply to real estate that is business inventory, and on a sale of rights also by virtue of other plans the exemption is granted only for the TAMA portion; changes in the attachments of the common property among the residents for the purpose of carrying out the TAMA, without monetary consideration, are exempt from betterment tax and purchase tax (section 49LD). According to the Instruction, the exemption applies to transactions from 18 May 2005 to 31 December 2016; at the first stage taxable assessments are issued whose collection is frozen, and the exemption is granted only after completion of the reinforcement on the basis of Form 4 or approval of the local committee.

Non-Application of Section 49F Where the Residential Apartment Sold Was Received as a Gift and the Donor Used an Exemption under Chapter Five 1 in Respect of It - 09/2009

Cancels an earlier instruction Cancels section 6(c) of Implementation Instruction 33/88 (partial cancellation).

The implementation instruction provides that where a residential apartment was transferred as a gift and the donor used an exemption under Chapter Five 1 of the Law in respect of it, the cooling-off periods in section 49F of the Law will not apply to the recipient of the gift. If the recipient of the gift sells the apartment in a taxable sale, the date and value of acquisition will be determined as of the date on which the gift was received and according to the purchase tax assessment in the gift transaction. The instruction cancels section 6(c) of Implementation Instruction 33/88.

Real Estate Taxation Implementation Instruction 8/2009: "Key Money", Allowing Its Deduction in Calculating the Gain

The instruction provides that in calculating the gain on the sale of a right in real estate by a person who was a protected tenant and subsequently purchased the ownership right, the key money paid to acquire the protected tenancy will be allowed as a deduction. The expense is adjusted from the date of the expense until the date of purchase of the ownership and is allowed as a deduction as at the date of purchase of the ownership, and documentation of actual payment is required, since not every protected tenant paid key money. For key money for a protected tenancy in business premises paid up to 31.3.64, the Director must be satisfied that it was not already allowed as a deduction by the assessing officer, and section 3 of Implementation Instruction 24/85 was cancelled.

Cancellation of a Transaction: Unilateral Notice - 8/2008

The instruction provides that, as a rule, cancellation of a transaction for real estate taxation purposes requires notice from all parties to it, but the Director may be persuaded that it is void also on the basis of a unilateral notice, for example a reasoned judgment ordering that the agreement is void; a consent judgment, an unreasoned judgment or a cancellation whose economic substance is a resale will be examined with extra caution. When a unilateral declaration of cancellation is received, the other party is contacted, and where there is no response or the Director is not persuaded, the cancellation will not be accepted. If the seller reported a conflicting transaction in the same property, the tax certificates will be issued only after payment of all taxes in the new transaction, including the higher betterment tax of the two assessments, and in the case of a residential apartment the exemption will also be granted in the later transaction if the seller meets all its conditions.

Section 39A: Conditions under which a Loan Will Not Be Deemed a Loan "from a Relative": 7/2008

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.

Conditions of the Exemption in Section 49E of the Law Regarding an Apartment Built by Self-Construction: CA 501/03 Eldad Hasson v. Real Estate Taxation Director, Hadera, and Appeals Committee 5138/05 Eti Zeevi v. Betterment Tax Director 11/2007

As at the date of its publication (November 2007), the Instruction deals with the one-time exemption under section 49E of the Law for an individual Israeli resident who sells two apartments within one year and purchases an "other apartment", where the other apartment is land for self-construction, following the Hasson judgment in the Supreme Court and the Zeevi matter in the Appeals Committee. According to the Instruction, land for self-construction will be deemed an other apartment if it was purchased within 12 months before or after the sale of the second apartment, and an undertaking was given to build a residential apartment and complete it within 3 years of the date of purchase of the plot. Half a year before the date declared for completion of construction, its progress must be proved, and if construction is not expected to be completed on time the exemption will be cancelled, and the taxable assessment will bear linkage differentials and interest from the date of sale of the second apartment until payment.

Calculation of the Gain on the Sale of a Residential Apartment Let for Residential Purposes: 5/2007

Cancels an earlier instruction Cancels Implementation Instruction 14/90.

As at the date of its publication (2007), the Instruction sets out how betterment tax is calculated on a taxable sale of a qualifying residential apartment that was let for residential purposes, according to the track chosen by the landlord for taxation of the rental income: the regular track, the reduced 10% tax track under section 122 of the Ordinance, or the exemption track under the Law on Exemption from Tax on Income from Letting a Residential Apartment. In all the tracks, current expenses that would have been deductible under the Ordinance will not be allowed as a deduction from the gain, and the depreciation that the landlord was entitled to claim during the letting period will be deducted from the acquisition value or added to the sale value, even if it was not actually claimed. Where the apartment is sold with an exemption from betterment tax, the track chosen has no significance, and the Instruction does not apply to an apartment used only as the residence of the seller and his family. The Instruction cancels Implementation Instruction 14/90.

Exemption for a Public Institution on the Sale of a "Qualifying Residential Apartment": 12/2004

The supplement amends Implementation Instruction 12/2004 concerning the exemption from betterment tax for a public institution on the sale of a qualifying residential apartment received by inheritance, under section 49B(6)(b) of the Law. Where the testator did not define in the will the use of the consideration money, an accountant's confirmation, at the time of reporting and requesting the exemption, of a defined use that will directly serve the public purposes of the institution may suffice. Use for paying salaries or investment in an income-producing property will not meet the condition, and the accountant's confirmation is also required in the annual report.

Allowance of Real Interest Expenses in Calculating the Gain on the Sale of a Right in Real Estate: 16/2003

As at the date of its publication (2003), the Instruction explains section 39A of the Real Estate Taxation Law, added by Amendment No. 50, and the judgment in CA 4271/00 M.L. Investments and Development, under which real interest payments on a loan taken to purchase the right in real estate or to improve it may be deducted from the gain. The cumulative conditions: the interest is not deductible under the Income Tax Ordinance, the loan was taken close to the purchase or improvement and not from a relative, and it is secured by a mortgage, pledge or caveat (or the right is registered in books kept by the double-entry method); the deduction is limited to the amount of the acquisition or improvement value and to the maximum interest rate under the Interest Order, 13%. For an apartment used by its owners as a residence or standing empty, the interest will be allowed against the gain, whereas for a let apartment in which the interest is deductible under the Ordinance it will not be allowed. The Instruction also establishes a "green track" for submitting the loan documents already at the time of purchase, and provides that interest incurred by a testator or donor who continued to repay the loan will not be allowed.

Purchase of a Residential Apartment Presented as a Purchase of Land and a Separate Order of Construction Services: 7/2001

As at the date of its publication (2001), the instruction provides, following Civil Appeal (Tax) 5024/99 Lang v. Real Estate Taxation Director, Hadera, that where a purchaser enters into an agreement to purchase land and, in parallel, into agreements to order construction services, co-ownership and the like, and there is a direct link between the agreements, the transaction should be regarded as the purchase of a built structure and not the purchase of land only; the split may also be deemed an artificial transaction under section 84 of the Law. The instruction lists indications (in a non-exhaustive list) that the sale is of a finished building, such as marketing the project as an apartment project, an obligation to sign all the agreements at the same occasion, building permits in the name of the developer or contractor, undertakings under the Sale (Apartments) Law and a developer's profit exceeding an accepted contractor's profit. It was further determined that such a split may indicate two sale transactions, and that in every case in which a split is discovered, a copy of the file is to be forwarded for examination of the criminal aspect.