Anyone owning more than one residential property in Israel could not fail to have observed the drunken roller coaster of emergency legislation on that issue over the last 18 months.
It all started with an initiative by the authorities to use tax incentives to bring more liquidity to the residential property market where there was an acute shortage of apartments for sale.
While a person holding a single residential property has traditionally been able to move house every 18 months without incurring land appreciation tax (effectively, capital gains tax), where more than one residential property is owned, other than in a bridging situation or certain other circumstances, the law has only permitted the tax exempt sale of one residential property every 4 years.
The first emergency measure allowed an additional 2 properties to be sold by the end of 2012 with tax exemption on the value of each up to NIS 2.2 million (and partial exemption if the value was above that) and various adjustments to purchase tax rates; the existing 4 year exemption was not affected. There were, however, extensive restrictions on the application of this provision, notably that it did not apply to residential properties used for non-residential purposes (such as, for example, dental practices)
Not seeing the market move fast enough, the government removed some of the restrictions (including the one applying to properties used for non-residential purposes) while bundling the “one tax free sale every 4 years” property into the package. This provision was legislated to sunset on June 30 2013.
In the meantime, in order to further encourage property owners to take up the authorities’ generous offer while it lasted, the legislation included a provision whereby, from 2013 until 2021, the “one tax free sale every 4 years” rule was replaced by “one tax free sale every 8 years”. Any use of the benefits would therefore preclude further sales for a prolonged period.
Earlier this month the 8 year requirement was repealed before it could come into force and the exemption for selling one residential property every 4 years was reinstated. The rest of the emergency measures stay in place.
With the legislation so volatile, it remains to be seen whether the last word has been uttered on this issue.
It should be noted that the above is a highly simplified and non-comprehensive version of events. The law as it existed before the emergency measures, and the emergency measures themselves, are excruciatingly complex and every transaction requires careful and specific consideration before being undertaken.