25%TAX ONCAPITAL GAINS«MAS SHEVA'H»
20% TAX ON UNEXPLOITEDDEVELOPMENT RIGHTS«HEITEL HASHBA'HA»
If there's one thing all real estate sellers in the world have in commonit's surely the feeling of injustice that overwhelms us when calculating the fees applicableto a real estate sale. Unfortunately there's no way to escape it but it's better to be aware of it before even setting your selling price
Indeed, while we systematically think about calculating the acquisition tax to expect during a real estate purchase, we often tend to forget these nonetheless significant expenses: because apart from the classic lawyer fees (generally between 0.5 and 1% of the sale price, plus 17% VAT), and possible agency fees (typically 2% +VAT), several unpleasant taxes are added: the capital gains tax and the tax on unexploited development rights. The capital gains tax, "Mas Sheva'h" is 25% on the profit made between the purchase price and the sale price; after deducting all possible fees (lawyers, agency, work, ...). If it's a unique property of an Israeli owner, the seller benefits from an exemption, but if the seller owns more than one apartment, then a 25% tax applies on the difference between the purchase price and the sale price distributed over the number of years of ownership and calculated from January 1st, 2014. Thus, for an apartment bought in 2008 for 1,000,000 shekels and sold in 2018 for 2,000,000 shekels by an owner of more than one apartment and without any fees to deduct, the tax will be 25% X 100,000 X 4, or 100,000 shekels.
The tax on unexploited development rights "Heitel Hashba'ha" is much more difficult to predict. It must be paid at the time of sale and theoretically amounts to 20% of the supposed capital gain. However, in this case, you first sign the sale contract, then the municipality sends an expert of its choice who makes an estimate of the foreseeable capital gain linked to the potential construction of additional square meters, and then a coefficient of 20% tax to pay is applied. In short, you can only make an estimate of the estimate before engaging in a sale process, and it is therefore strongly recommended to verify this very delicate point with your lawyer before any procedure! A law is being planned so that this tax which applies today to the seller would in the future be applicable only when filing for a building permit, which could further lower the sale prices of certain properties.
In conclusion, for an apartment bought for 1,000,000 shekels in 2008 and sold for 2,000,000 shekels in 2018, you should expect a total of "incidental costs" that could reach 200,000 shekels depending on the residential sector. It's therefore more than useful to take a moment with your lawyer to verify as best as possible what it could be before the sale. As always, in this type of transaction, it is essential to surround yourself with recognized and experienced professionals.
Sources: Globes, Ministry of FinanceDéborah Hosatte
