Real Estate Tax Attorney

A real estate tax attorney calculates the capital gains tax (mas shevach), purchase tax, and VAT on a real estate transaction before signing, prepares the declarations for the Tax Authority, and represents clients before the Real Estate Taxation Administrator when the assessment exceeds expectations. The practice is led by Adv. Ariel Epstein, a partner at the firm. In transactions involving VAT issues, he is joined by Adv. & CPA Shlomi Vaknin.

The first deadline: both the seller and the buyer must each file a declaration within 30 days of the transaction date (Section 73 of the Real Estate Taxation Law). Send us the draft contract or the assessment notice, and we will review what applies to your transaction.

The best time is before signing, because most exemptions depend on the structure of the transaction and on timing. These are the situations in which clients turn to us:

• You are selling an apartment and want to know whether it qualifies for a capital gains tax exemption as a sole residence, and what happens when the price exceeds the exemption ceiling.

• You are purchasing an additional apartment, or a replacement apartment before selling your current one, and need to know what purchase tax rate will apply.

• A landowner or apartment owners in a building are entering into a combination deal, an evacuation-and-reconstruction (Pinui Binui) project, or a TAMA 38 agreement with a developer.

• You are selling or buying shares in a company whose sole assets are real estate. Such a transaction is taxed as if the property itself were sold.

• You received a best-judgment assessment notice because the Administrator did not accept the declaration you filed (Section 78(b)(2)).

• Your objection was rejected, and you have 30 days left to file an appeal with the Appeals Committee (Section 88).

• The VAT Director is demanding tax on the sale of a property, on the allocation of building rights, or on public infrastructure obligations in a project.

The Real Estate Taxation Law (Capital Gains and Acquisition), 5723-1963, imposes two taxes on the sale of a right in real estate. The seller pays capital gains tax (mas shevach) on the profit, and the buyer pays purchase tax on the value of the right acquired. The same rules apply to a "transaction in an association" (pe'ula be'igud), i.e., the sale of shares in a company whose sole assets are real estate.

Capital Gains Tax and Purchase Tax in Brief

• An individual pays capital gains tax of up to 25% on the real (inflation-adjusted) gain (Section 48A(b)(1)), while a company pays at the corporate tax rate. Different rates apply to part of the holding period for property acquired before 2012.

• An apartment that has been your sole residence for at least 18 months is exempt from capital gains tax (Section 49B(2)), up to a sale value of NIS 5,008,000 for the years 2025–2027 (Section 49A(a1)).

• Purchase tax on a sole residence starts at 0% up to NIS 1,978,745. For an additional apartment, the rate is 8% up to NIS 6,055,070 and 10% above that, under a temporary provision valid until 31.12.2026. Due to the Knesset elections, Section 38 of Basic Law: The Knesset is expected to extend it for up to three months from the convening of the new Knesset. What will apply afterward depends on legislation, so the applicable rate should be verified on the date of signing.

The tax brackets, exemptions, and deductions are detailed on the Capital Gains Tax and Purchase Tax 2026.

Reporting, Payment, and Assessment

• The seller must file a declaration within 30 days of the date of sale, and the buyer within 30 days of the date of acquisition (Section 73). The declaration is deemed a self-assessment.

• The tax according to the self-assessment must be paid within 60 days of the date of sale (Section 91).

• The Administrator has 8 months from the date of the declaration to approve it or to issue a best-judgment assessment (Section 78(b)). Before issuing such an assessment, the Administrator must give you an opportunity to present your arguments (Section 79A).

• The Administrator may disregard a transaction that, in his opinion, is artificial or fictitious, or one of whose principal purposes is tax avoidance (Section 84).

Objection, Appeal, and Court Appeal

• A reasoned objection to an assessment must be filed within 30 days of the date the assessment notice was served (Section 87(a)).

• The Administrator must decide within 8 months, or up to one year for special reasons. If no decision is made in time, the objection is deemed accepted (Section 87(d) and (f)).

• The decision on the objection may be appealed to the Appeals Committee within 30 days (Section 88). The Committee is chaired by a judge (Section 89).

• A decision of the Appeals Committee may be appealed to the Supreme Court on a question of law, within 45 days (Section 90).

• An assessment that has been finalized may be amended within 4 years if new facts are discovered or if there is an error in the assessment (Section 85).

VAT in Real Estate Transactions

Capital gains tax and purchase tax are only part of the equation. A developer or contractor selling apartments in the course of business is also liable for VAT. In Pinui Binui and TAMA 38 projects, zero-rate VAT applies to the construction services the developer provides to the residents, subject to the conditions set out in Section 31A of the VAT Law (Pinui Binui) and Section 31B (TAMA 38). The real estate rulings that Adv. Shlomi Vaknin led, presented below, dealt with these issues. A VAT dispute is conducted vis-à-vis the VAT Director and under a different statute, and is explained on the VAT Attorney. When the sale of a property is subject to VAT and what applies to construction services for residents is explained on the VAT in Real Estate Transactions and Urban Renewal.

The work begins before signing and ends when the tax has been paid and the transaction can be registered in the Land Registry. These are the stages:

1. You send us the draft contract, a land registry extract (Tabu), and details of other apartments owned by you and your spouse. We calculate the expected capital gains tax and purchase tax and check which exemptions apply.

2. When an exemption is conditional—for example, selling the previous apartment within 24 months—we verify that the contract and timelines are aligned with the requirement.

3. After signing, the declarations are filed within 30 days, together with the deductions and exemption claimed (Section 73(a)). The Administrator sends a notice of the tax amount within 20 days (Section 78(a)), and the tax is paid within 60 days.

4. If the Administrator notifies that the declaration is not accepted, we present our arguments already at the right-to-be-heard stage, before an assessment is issued.

5. If you disagree with an assessment, an objection is filed within 30 days, and if necessary, we proceed to the Appeals Committee.

Three court rulings in real estate transactions, all in VAT appeals before the District Court:

Neve Gad: Tax Appeal 53560-11-21 (9.11.2023)

In a Pinui Binui project, the developer paid the legal fees of the residents' attorney, and the VAT Director disallowed the deduction of the input tax on the invoice. The Tel Aviv District Court held that the legal services provided to the residents form part of the construction services, and therefore the developer is entitled to deduct the input tax. On the other two issues (the time of the taxable event and the calculation method), the appeal was dismissed, and the company was ordered to pay costs of NIS 90,000. Adv. Shlomi Vaknin represented Neve Gad. The VAT Director appealed to the Supreme Court, and the appeal is pending. The ruling in the Neve Gad case.

A.Z.Y. Real Estate (Yochman): Tax Appeal 68651-05-22 (9.5.2024)

A company and its shareholders jointly purchased real estate in the Baka neighborhood of Jerusalem, and before the acquisition they agreed in writing that the future building rights—including those arising from TAMA—would belong to the shareholders. The VAT Director argued that there had been an additional transaction in which the company sold them rights. The Tel Aviv District Court held that no such transaction had taken place, and that even if it had, the time for assessing tax on it had expired under the statute of limitations. Globes reported on the cancellation of a NIS 1.5 million charge. Adv. Shlomi Vaknin and Adv. Ariel Epstein represented the company. The article on the Yochman case.

Aura Investments: Tax Appeal 62970-03-22 (13.2.2025)

The VAT Director assessed a developer for tax on the construction of public buildings and on the relocation of a public parking facility and kindergartens, arguing that these constituted services to the municipality. The District Court held that the works for the municipality are services subject to VAT, but that the occupancy permit and areas received through a land consolidation and redistribution plan do not constitute consideration. The VAT on the parking facility was reduced from NIS 4,203,927 to NIS 1,799,875, and the charge on the kindergartens was recalculated according to the company's computation. The question of whether mere relocation constitutes a service to the municipality was left open. Appeals against the ruling have been filed with the Supreme Court (Civil Appeal 45772-12-25) and are pending. Adv. Shlomi Vaknin and Adv. Ariel Epstein represented Aura. The ruling in the Aura case.

Additional rulings are compiled on the Case Law and Precedents.

Adv. Ariel Epstein, a partner at the firm, leads the real estate taxation practice. He completed his internship at the Legal Bureau of the Customs and VAT Division at the Israel Tax Authority headquarters, and studied real estate development in a program run by Ono Academic College and the Ministry of Construction and Housing. Together with Adv. Shlomi Vaknin, he represented Aura in the public infrastructure obligations case and A.Z.Y. Real Estate.

In transactions involving VAT issues, he is joined by Adv. & CPA Shlomi Vaknin, the firm's founder, who served for nearly a decade as a national supervisor in the Professional Division of the VAT Department at the Israel Tax Authority headquarters. He represented Neve Gad and A.Z.Y. Real Estate.