The new law prescribes that, as of January 1, 2017, every taxpayer must pay tax annually (January through December) for every residential apartment that he owns in excess of two apartments, at the sum defined pursuant to the provisions of the law. The taxpayer will be allowed to choose which of his apartments he deems to be his first two apartments, and which shall be taxable under this law.
In other words, owners of three and more apartments shall be taxed in respect of every additional apartment owned as of the third apartment, according to the percentage of his ownership in the said additional apartments.
Exception: the law does not apply to a taxpayer if the value of all apartments he owns, after deducting the apartment with the highest value, is less than a total of NIS 1,150,000.
Who is liable for tax?
Any individual (including a spouse - unless permanently residing at a different address - and minor children) owning a number of residential apartments, when the aggregate percentage of his ownership of these properties is at least 249%.
A residential apartment owned through a closely-held association (i.e. a partnership or company that has five or fewer direct or indirect owners) is tantamount to a residential apartment owned by an individual.
The law also defines residential apartments that are excluded from application of the law, including, inter alia, a residential apartment owned by a non-profit entity (amutah), a residential apartment used for long-term rentals pursuant to a government auction, a residential apartment that is being leased under the Tenant Protection Law, a residential apartment that constitutes business inventory for the purposes of income tax, a residential apartment obtained by way of inheritance, provided that it was not let out during the first year after the death of the testator (in any event, it shall be counted as an additional apartment after the first year).
An apartment that was lawfully split shall be deemed a single apartment.
What is the tax rate?
One percent of the value of the apartment, but not more than a total of NIS 18,000 per annum in respect of every apartment liable for such tax.
The value of the apartment is determined according to economic, social and geographic indicators, taking into account the size of the apartment and is calculated using the formula specified in the addendum to the law.
The sum of the tax in respect of ownership of a portion of an apartment shall be calculated according to the taxpayer's...