As of January 1st, 2019 the Israel Tax Authority has a new law that will affect property buyers and owners in Israel. It’s aimed at preventing black market transactions and tax evasion. These issues exist in Israel to a larger extent than other OECD countries, whom already have similar laws in effect.
What is this law and how does this affect me as a property buyer?
For Israeli and foreign nationals alike, if you are buying a property, Israel now bans cash transactions over 11,000 shekels – this makes using cash in a real estate transaction nearly impossible or have a negligible effect. This new law applies to any kind of Israeli real estate, commercial, residential, investment, gift, and even owner-occupied properties.
It’s important to note that there is an additional obligation for buyers, which is to send information to the Israeli Tax Authority within six months of signing a contract.
But then again, this is Israel. Shay Aharonivich, Senior Deputy Director for Land Taxation at the Israel Tax Authority alluded to lenience and gradual implementation at a recent conference, as reported in Israeli press.
And there is a notable exception – money transferred between friends can be up to 50,000 shekels. In an even more Israeli twist to this law, transfers between family members or to the government will not be limited at all. So, if you’ve got tons of cash, the government is happy to take it no questions asked.
How does this affect paying for renovations?
This is so important! Property owners who pay for work without receiving a receipt with VAT are at risk of being fined if caught. Not only does the Tax Authority have the ability to fine you, the burden of proof is heavily on the property owner. For example, property owners who do not have a receipt for work performed will be assumed guilty of paying in cash. The burden of proof is on the owner, so be sure to save receipts.
How can I save the most money here?
The exemption for family members and the higher threshold for friends could make it possible to transfer and use more cash in transactions. Avoiding fines is a great way to save money, so file with the Israeli Tax Authority within 6 months of a contract and save your receipts for all renovations.