Richard Mann Law Offices, 20 Hagaaton Boulevard, Nahariya (2026)

26/04/2026

Selling two apartments to buy one? Plan the proper order.

Two years ago, I met with clients, husband and wife, that were about to buy a new apartment from a local developer and intended to sell two apartments to fund the purchase. I explained that a proper order was crucial to minimize their upcoming tax obligations (and avoid tax landmines).
The couple intended to sell an investment property and their primary residence – which they estimated was worth triple the value of the investment property.
The couple certainly wanted to avoid a purchase tax landmine – if they owned two apartments when they signed a purchase contract they would be subject to 8% purchase tax. They needed to sign a contract of sale for one apartment before signing a purchase contract.
The order was simple: 1) sell the investment property and pay the subsequent capital gains tax; 2) sign a contract to purchase the apartment still under construction as a sole apartment and undertake to sell their current primary residence within the statutory mandated period; and 3) sell the primary residence within the statutory mandated period to claim an exemption as a sole apartment.
The proper order was imperative to pay the minimal amount of capital gains tax, the minimal amount of purchase tax, and enjoy a full exemption on capital gains tax.

09/02/2023

Tax on real property rights transfer to a trust

I recently met with a colleague who specializes in trusts. I had reviewed the leading real estate taxation cases for 2022 a few days before we met and so gave a bit of extra thought to one of the leading cases, Real Estate Tax Authority vs Galis.
In Galis, the Supreme Court reversed a Tax Court ruling that had recognized the transfer of real property to a trust as not subject to either capital gains tax or purchase tax. This Supreme Court judgment sent waves through the trust attorney community. Among real estate attorneys I would say not so much.
In Israel almost every transfer of real property rights is subject to tax. With limited exceptions such as inheritance or transfer of rights in their residence between parties to divorce proceedings, transfers require notifying the Real Estate Tax office and transfer of title requires submitting tax approvals from the seller/transferor and from the buyer/transferee to the Land Registry.
The Galis decision addressed two sections of the Real Property Tax Law (the “Law”) to determine whether the Galis transfer met either of the requirements to enjoy an exemption from tax:
1. Section 3 of the Law relates to transfers of control of real property pursuant to a fixed set of statutory appointments that include a legal guardian, receiver or bankruptcy trustee and states such transfer is not considered a “sale of real property interest.” If such property is subsequently sold it is considered as a sale by the original owner. It is important to note that in these instances, i.e. the appointment of legal guardian, receiver or bankruptcy trustee, there is no change in the title of ownership. The appointment is registered as an encumbrance on title.

2. Section 69 of the Law specifically relates to a trust relationship between a purchaser and nominee trustee who is appointed to act on the purchaser’s behalf. This section relates to the purchase of real property rights by a trustee on behalf of a beneficiary or beneficiaries. Purchase tax is paid by the trustee at the time of purchase. Pursuant to section 69 a subsequent transfer of real property rights from a trustee to the beneficiary / beneficiaries is exempt from tax. This exemption exists only if the trustee and beneficiary declare their relationship to the real estate tax authority at the time of purchase by the trustee. In this instance title does change and is initially registered in the name of the trustee.

The parties in Galis did not meet either of these statutory exemptions and as such the transfer of real property rights to the trust was subject to tax. Galis failed in the immortal words of my law school tax professor Martin Ginsburg to “kiss the statute.”

A major issue not discussed in the judgment was transfer of title. A primary concern for real estate practitioners is transfer of CLEAN title of ownership to the name of the purchaser / transferee. A transfer of registered ownership of the real property rights from Galis to the trustee would look and smell like a taxable event. Or did ownership remain in the name of Galis with title encumbered to the trustee?

Nonetheless with regards to any real property transaction or transfer of rights in Israel (except inheritance or specific property in a divorce), the presumption is full taxation unless a party qualifies for an exemption.

28/02/2021

Durable power of attorney in Israel

A power of attorney (“POA” ) is a document authorizing an agent to represent a principal in his or her place.

A durable power of attorney is a document authorizing an agent to represent the principal even in the event of the incapacitation of the principal.

Prior to the change of law in 2016, a durable power of attorney did not exist in Israel. The incapacitation of a principal terminated the validity of a POA. [the statutory exception of a POA executed to protect a third party’s rights is not relevant to this discussion]

Up until the change in law, the only legal path for the representation and management of the property of an incapacitated person was by a court ordered appointment of a guardian.

In the instance of a court appointing a guardian for an incapacitated spouse, the couple are required to separate their assets and income, which includes the opening of separate individual bank account for the incapacitated spouse.

The change in law now allows a person to execute a durable power of attorney and appoint a representative to act on his or her behalf in the event of incapacitation. Thus a person can avoid the need for a court to appoint a guardian and direct the continued management of community (marital) property and income.

The durable power of attorney allows the principal to appoint his or her representative, dictate the scope of authority and provide specific instructions.

There are two clear instances to consider executing a durable power of attorney:

1. Someone diagnosed with diminishing mental capacity or other impairing infirmity, or someone who wishes to plan for such event;

2. A couple seeking to continue the use of joint assets and to manage a joint household, without the laws and regulations imposed upon the administration of a guardianship regarding the separation and use of joint assets and income.

22/10/2020

5 things to know about probate in Israel regarding the estate of a foreign resident decedent who owned real and/or personal property located in Israel:

1. There are no shortcuts. Legal proceedings to probate a last will and testament or for intestacy are necessary to claim the property of a decedent.

2. Certification of Documents. Documents from abroad require Apostille or Israeli Consulate certification. (such as death certificate, power of attorney, affidavits)

3. Intestacy and choice of law. In general rights of inheritance of real property are in accordance with Israeli law, rights of inheritance of monetary property are subject to the law of the domicile of the deceased.

4. Probate of will. Foreign wills are often drafted without consideration for the disposition of property rights in Israel. Testamentary trusts commonplace in certain jurisdictions are a complication.

5. Once a Probate Order or Intestacy Order is obtained, anticipate further bureaucracy in claiming inherited property such as bank moneys and real property.

19/12/2019

Selling real property in Israel – 5 basic tasks to perform prior to sale
1. Proof of ownership. Obtain an updated extract of ownership from the Land Registry; if the property is not yet registered obtain updated written confirmation of ownership from the relevant entity (Israel Land Authority; developer).

2. Mortgage. If there is a mortgage on the property obtain an updated confirmation of the balance of the loan.

3. Supporting Documents. If the property is a unit in a building or complex registered in the Land Registry as a condominium prepare the land registry documents for the property. If the property contains a single or two family home prepare a copy of the certificate of completion (tofes 4), building permit and plans. If the property is a rental property, prepare copy of lease agreement and security documents.

4. Taxes. Understand potential tax obligations: capital gains, betterment tax. If so, organize documents regarding date and amount of purchase, receipts related to purchase such as broker’s fee, attorneys fee, purchase tax, and receipts related to improvements or substantial repair.

5. Basic terms. Consider desired date to transfer of possession from the date of signing a contract and desired (and reasonable) schedule of payment.

10/12/2019

5 starting points to help Olim navigate the purchase of their first home in Israel

1. Remember – you are not in Kansas anymore. Avoid assumptions based on your experience somewhere else. Israel has distinct types of ownership rights and transactions are structured differently.

2. DO NOT accept everything you are told as the truth even the “facts.” Homeowner sellers are often misinformed about the status of their own property. Brokers rarely do homework about the property they want you to buy.

3. Bringing in money from abroad? Check with your Israeli bank regarding its demands to accept transfer. Money laundering laws are stringent and the banks are cautious.

4. Prepare a budget that accounts for transfer and conversion fees, purchase tax, mortgage costs, broker fees, legal fees, and ancillary costs depending on the property.

5. Don’t commit, don’t sign anything, until you are ready to commit. A memorandum, known as a “zichron dvarim”, is a legally binding agreement.

23/04/2018

The “Zichron Dvarim”

“Zichron Dvarim” is a document signed between parties setting forth the basic terms of an agreement. In a pending real estate transaction if enough basic terms are set forth this document constitutes a binding agreement between the parties. [basic terms include: description of the property, sale price, date of delivery of possession, and payment terms]. Even though the parties intend to negotiate the details and execute a sales agreement.

Some of my colleagues say NEVER sign one. A seller could be stuck with an unwanted buyer. A buyer’s reasons and risks increase the more complicated the transaction. A buyer could find issues which deter the transaction such as: extent of ownership rights of the seller, registration of the property, illegal building, bank approval of a mortgage, existing liens and encumbrances, and boundaries.

Why yes (or why never say never)? The parties want to take the property off the market and set the basic foundations of a transaction while they negotiate the terms of contract. Buyer should still add language saying that an agreement is subject to due diligence of his or her attorney.

Zichron Dvarim is a favored document of real estate brokers. In general, the broker’s interest is a transaction. An attorney’s interest should be protecting his or her client from a bad transaction.

06/07/2017

Landlord Status

The wave of apartment purchases in Israel for investment over the last few years has placed numerous clients in the new role of landlord. Their newfound responsibilities include:

Deciding the basic terms and condition for rental such as: 1) term of the lease, 2) whether to grant an option to extend, 3) the amount of rent, 4) specific requirements depending on the attributes and condition of the property, and 5) guarantees of performance (security). Determining the acceptable guarantees will assist in w**ding out less desirable prospective tenants. Adequate security can reduce the risk of breach and the risks in the event of breach.

Finding a tenant! The attributes of the property will attract interested prospects. Providing basic contractual details early will w**d out some prospects: rent, added costs (arnona, vaad beit) specific security requirements (cash deposit/bank guarantee/guarantors). A property may be expensive. It may be modest. Good tenants and deadbeats exist along the spectrum of properties.

Drafting and negotiating a contract. There are basic terms and there are terms dictated by the specifics of the rental property. It is important that the contract reflects the transaction and provides the Landlord with contractual protection.

Being a landlord entails more than just receiving a monthly rent check. The landlord has responsibilities as owner of the rental property. Prudence demands more than just printing a "standard" agreement off the internet.

21/12/2015

Although Israel has no estate tax, one area that does demands awareness and planning pertains to transactions of residential property received via inheritance.

Pursuant to Real Estate Taxation Law section 49(b)(5) The seller of an eligible residential property has the right to an exemption from tax upon the sale of the property received by inheritance, provided all these apply:

a. the seller is the spouse of the testator / decedent, or the issue of the testator / decedent, or the spouse of the issue of the testator / decedent;
b. before his death the testator / decedent was the owner of only one residential apartment;
c. if the testator / decedent was still alive and sold the residential apartment, he would be eligible for an exemption for the sale of the property;

An additional condition is that an heir must be an Israeli resident to exercise the exemption.

02/09/2015

Real Estate Tax Landmines
Changes in Israel real estate tax law as of January 1, 2014 and recent attempts by the government to lower real estate prices, by increasing taxes and eliminating exemptions, have raised the risks of hitting tax landmines.

[do not believe the government's assertion that it seeks to reduce prices by eliminating investors, the government just wants the money]. Two simple examples:

1. The elimination of the "automatic" once every 4 years exemption (section 49(b)(1).
2. The elimination of exemptions for non-residents. [sale of sole residence – No exemption; sale of rights received via inheritance – No exemption].

Two landmines on taxable transactions:

1. If residential property sold produced rental income for the seller, the tax authority will deduct depreciation (whether used or not) from the purchase price, in order to create capital gains or increase them.

2. Properties purchased before 1993 - 10% tax solely on gains due to inflation up to 1993.

Don't make assumptions and avoid tax surprises.

Richard Mann Law Offices

26/04/2026

09/02/2023

28/02/2021

22/10/2020

19/12/2019

10/12/2019

23/04/2018

06/07/2017

21/12/2015

02/09/2015

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