TA 10304-07-14 I.P.F. Entrepreneurship and Investments Ltd. v. Director of Value Added Tax Tel Aviv
TA 10304-07-14 I.P.F. Entrepreneurship and Investments Ltd. v. Director of Value Added Tax Tel Aviv (Nevo 16.01.2017):
The court accepted the appeal filed by I.P.F. and held that the sale of residential apartments as part of a building that was sold is not subject to VAT.
The appellant operates in the real estate sector and purchased the majority of rights in a building containing residential apartments and commercial units leased to third parties. Approximately three years later, the appellant sold its rights in the property. The appeal revolved around the question of whether the appellant is exempt from tax with respect to the sale of the residential apartments, pursuant to Section 31(4) of the Value Added Tax Law, or whether the sale of the apartments is subject to VAT under Section 5(b) of the VAT Law, as argued by the Director of Value Added Tax Tel Aviv.
The court examined the circumstances of the case and the objective evidence presented before it, and held that under the specific circumstances of the case, the appellant was correct in its contention that at the time of purchasing the building, it was not entitled to deduct input tax attributable to the residential apartments under Section 41 of the VAT Law. Accordingly, the sale of the apartments in 2009 is exempt from tax pursuant to Section 31(4) of the VAT Law.
