Israel Steps Up Campaign Against Tax-Evading Airbnb Landlords

Author:Mr Dave Wolf & Co
Profession:Dave Wolf & Co

The Israel Tax Authority says landlords letting apartments for short-term visitors should be paying more tax—if the policy is upheld, it could reduce the number of properties available in Israel through Airbnb and similar sites.

For the third summer in succession, tax authority inspectors booked apartments online, arrived to meet the owner, and presented them with tax demands on undeclared income, the Israeli business daily Globes reported.

Israeli law allows landlords extensive tax breaks on letting residential apartments, but the growing popularity of online vacation sites has highlighted the grey area of short-term rentals, which have not always been declared as businesses. Meanwhile, Israeli hoteliers have lobbied for increased taxes and greater regulation on landlords, fearing the growth of the vacation apartment business.

"The Tax Authority is acting to enforce the payment of legal tax on rental of apartments for the short term," a spokeswoman told Bloomberg BNA Aug. 23. The authority's position is that "renting an apartment for short and occasional periods, whether by the landlord or its tenants, is like renting a holiday cabin or any other business. Therefore, according to the law, it is subject to tax as business income, and it is not possible to receive the benefits stipulated in the law for renting residential apartments."

A spokesman for Airbnb Inc. said the company wants to work with governments around the world on progressive tax rules for occasional hosts and looks forward to constructive discussions in Israel.

"There is a big difference between regular people occasionally sharing their homes and professional operators running a business," the spokesman said by email on Aug. 23. "The typical Airbnb host in Israel shares their home for 22 nights a year to boost their income and support their families—they are not businesses or professionals. Airbnb wants to be regulated and hosts want to pay their fair share of tax, and we encourage the government to follow the example of other countries around the world that have introduced clear, fair and proportionate rules for regular people who share their homes."

Rental Income Exemption

Israeli landlords can receive a full tax exemption on regular rental income up to 5,010 shekels ($1,394), a partial exemption on larger amounts, pay a flat 10 percent tax, or claim expenses against the rental income and include it in their standard tax return. Carmit Bar-On, a partner who heads the Hotel...

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