The taxation of land revenues in Israel

The taxation of land revenues in Israel: Three advantageous systems.

The relatively low level of interest rates in most of the countries of the European Union are intended to encourage investment and to release funds blocked in the term. It is the opportunity to study (or to reconsider) the relevance of real estate investments for rental purpose. As such, Israeli property tax has many advantages to assert.
There are many investors who are planning to acquire an apartment in Israel, as an investment, for to rent. In a general environment of declining financial yields, This type of long-term investment can prove to be very profitable, as the Israeli taxation of land income offers several interesting options.
There are three tax regimes:

The tax exemption:

This is the best-known regime. There has been 1990. In practice, If rental income does not exceed a monthly ceiling 5,030 Shekels (for the year 2016), they will be purely and simply exempt. This option only applies to rentals for housing and will be interesting only if rents do not exceed the limit set out in the Act. In general, This regime should be a single apartment owners.

The discharge of levy 10%:
This second option allows not to pay that 10% tax on rents collected,no income limit. Regardless of that rental income amounted to 6,000 shekels or at 15,000 shekels. There are two drawbacks to this plan:

1. The tax must be paid under 30 days from the end of the fiscal year (either to the 30 January of the year following the year of collection of rents).

2. No expense or amortization cannot be deducted from tax revenues. Despite these two drawbacks, This scheme is very advantageous for large landowners. In fact a tax rate of 10% is considered to be very advantageous.


The imposition of the rents to the progressive rate of income tax:

This progressive scale varies from 31% to 50%. It is therefore less interesting priori. On the other hand, under this scheme, It is possible to deduct the expenses related to the property (Attorney fees, Agency Commission, interests of loan, work), as well as depreciation. This scheme may be interested investors who have committed or intend to incur significant costs of work, or those who support an important credit. After deductions, the schedule will apply for the perceived benefit. The interest of the method is thus function expenditures and planned revenues.

It is important to note that revenues land taxed (or exempt, According to the tax system chosen) perceived in Israel only will be not taxed a second time in France, and this under the French tax convention against double taxation. In other words, and subject to have paid the local tax obligations, This income will not be taxed in France.

Jérôme Berdugo, Lawyer at the bar of Israel


Jérôme Berdugo is a lawyer at the bar of Israel and specializes in business law, in civil law and real estate law. It also a specialist in the field of real estate taxation and international taxation (France Israel)

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