105 / 114
The US-Israel Legal Review 2019 105
eligible for reduced tax brackets.
Similarly, a foreign resident who can prove to
the Israeli Tax Authorities that the apartment he
is selling in Israel is his only one and that he does
not own any other apartment in his country of
residence, may be eligible for an exemption from
betterment tax upon sale of that apartment.
A certificate from the tax authorities in the
foreigner’s country of residence showing that
he does not own an apartment there, would be
sufficient.
If such certificate cannot be obtained, the
foreign resident will have to provide objective
evidence proving that he does not own such other
apartment in his country of residence, and convince
the Israel Tax Authority. He would, initially, have
to demonstrate where his permanent residence
is in his country of residence, and substantiate
the rights he has to such residential property. He
would have to submit a lease or other agreement
showing that he is a leaseholder rather than owner,
and a certificate equivalent to city tax, showing
that he pays taxes abroad in the capacity of a
possessor rather than an owner – to the extent any
such certificate can be produced. Alternatively, he
could submit a certificate from the tax authority
in his country of residence, confirming that he has
not reported rent income on residential or other
real estate property, or submit his tax returns for
the relevant period (if he has rent income on non-
residential real estate property, he may, in addition,
submit an affidavit pursuant to the Israeli Evidence
Ordinance confirming that such income did not
accrue on residential property but on a different
kind of property).
In support of such certification, the foreigner
must submit an affidavit in which he declares he
has no rights in any residential property in his
country of residence.
In case of a federation such as the United States,
the applicant must make sure that the certificates
confirm that he has no residential property in any
of the counties in that state or in any of the states
within the federation.
Such certificates could result in significant tax
savings, both upon purchase and upon sale. Note
that this tax break is available only with respect to
residential property.
CONCLUSION
When buying real estate property in Israel, the
buyer is advised to make sure that before signing
the purchase agreement, his lawyers conduct all
the necessary inquiries with regard to the prop-
erty and the seller’s rights therein. In some cases,
lawyers will connect the buyer to appropriate
experts, such as civil engineers or real estate ap-
praisers.
The importance of these inquiries before signing
the agreement is paramount, because once the
agreement has been executed, it would be very
difficult to revoke or terminate the transaction or
amend the agreed consideration, even if a material
defectisdiscoveredonlyafterexecution.Termination
and restitution under such circumstances would be
subject to the seller’s consent or a court order – a
situation that sensible buyers would seek to avoid.
n
ABOUT THE AUTHOR
Lee Maor is a partner in the Real Estate group
of Yigal Arnon & Co. She provides ongoing legal
advice to real estate companies and contractors and
represents clients inabroadrangeof issues including
complex real estate transactions, the purchase and
sale of various properties, housing and commercial
projects, combination deals, urban renewal projects,
land registration, project finance and construction
and management agreements.
Lee received her law degree from The Hebrew
University in Jerusalem in 2006 andwas admitted to
the Israel Bar in 2007.
CONTACT:
Lee Maor
Partner
T: (+972) 3 608 7827
E: leem@arnon.co.il
Fax: (+972) 3 608 7725
Yigal Arnon & Co.
1 Azrieli Center
Tel Aviv 6702101
Israel www.arnon.co.il