A little known fact about the new betterment tax regulations in Israel explained by Yokra Estate:
A recent law passed by the Knesset revokes the betterment tax exemption for foreign residents and owners of more than one apartment following a sale. As of 2014, sellers will be charged a betterment tax, which will be 25% of the property’s real appreciation during the seller’s ownership period. Properties sold before December 31, 2013 will be exempt.
For example: If you bought an additional apartment in year-end 2006 at a price of 2 million Shekels and sold it in 2013 for 3.5 million Shekels, for a profit of 1.5 million Shekels, you wouldn’t pay the state one cent, because of the exemption. Conversely, if you sold your apartment in year-end 2013, your betterment tax would be calculated as follows: the last two years out of 9 years, 2014 and 2015, would be charged the betterment tax. The first seven years up to year-end 2013, would be totally exempt. Therefore, you would be charged 5.5% of the appreciation during your ownership. The tax rate is 25% divided by 9 years times two non-exempt years which equals 5.5% of your profit, or a total of 82.5 thousand Shekels. This is a marked difference, compared to someone who sold their apartment in year-end 2013.
Yours, Yokra Estate. Yossi
