Selling an apartment?
What are the taxes that will apply to you?
When selling an apartment, a praise tax will apply to the seller, unless he is entitled to an exemption from this payment. The tax is imposed on the profit generated from the sale of the property and therefore if it is a sale of an apartment at a loss, there is no liability. In addition to the appreciation tax, the seller can and will be charged an improvement levy, if at the time of his ownership of the apartment, he received new building rights.
מאת עו״ד ונוטריון יגאל מור
דיוק בייעוץ המשפטי. מצויינות בליווי המשפטי.
Selling an apartment? You should know what a praise tax is
This is a tax payment imposed on capital gain when selling real estate, auch as an apartment. For the purpose of calculating the amount of tax, four key parameters are examined: the amount received by the seller for the property, the price at which he purchased the apartment at the time, improvements made during the period of ownership of the apartment and depreciation. The praise tax rate is 25% of the profit and is therefore a very high tax cost. Is every sale of an apartment accompanied by the payment of praise tax? The answer is no. First, when the apartment is sold at a loss, the seller does not make a profit and therefore has no tax liability. Second, there are cases where praise tax exemption can be obtained. Due to its high cost, it is very worthwhile to carry out an in-depth examination of whether the seller is entitled to an exemption. It often turns out that the seller is not entitled to an exemption in the present, but will be entitled over time, so it is very possible that he should wait with the sale of the property.
Types of exemptions
The law allows for an exemption from paying praise tax in different circumstances, with each type of exemption having its own conditions and exceptions. One of the common cases for obtaining an exemption from praise tax is when selling a single residential apartment and its receipt is conditional on a number of conditions such as: The apartment sold is the seller’s only apartment and if the seller owns another apartment, its share does not exceed 1/3. Another example is receiving an exemption from praise tax when selling an inherited apartment, which the seller will be able to enjoy regardless of the number of apartments he owns or the number of exemptions he has used in the past. This is because in order to obtain the exemption, the status of the testator and not of the heir is examined. This exemption will be granted if three conditions are met: the seller is the spouse of the testator, his descendant, or the spouse of the descendant of the testator, before his death, the testator owned only one residential apartment while he was alive and sold his apartment, the testator was entitled to praise tax exemption .
Improvement levy
In addition to the improvement tax, the seller can and will also be liable for an additional tax called the improvement levy. This is a tax imposed on someone who, during his ownership of the apartment, received extension rights. This figure improves the property and the seller will be required to pay tax. We emphasize that the building rights can be whether it is a private house in which a right was granted to expand the house or a high-rise building, then the landlord can and has received a building right on the roof. The rate of the improvement levy is higher than the improvement tax and stands at 50% of the improvement value. In this context it is important to note that there is often room to appeal the assessment sent to the seller and if the appeal is accepted, the seller will pay a lower tax. Therefore, here too it is advisable to consult with a real estate attorney who will examine whether there is a reason to appeal the amount of the assessment determined.
In conclusion
As we understand, when selling an apartment, the seller is liable to pay appreciation tax and he can also be charged an improvement levy. These are very high taxes that have the potential to affect the viability of the transaction and the correct timing of the sale. It is therefore advisable to consult with a real estate attorney, who will examine in depth the circumstances of the case and examine all the possibilities for obtaining an exemption from paying appreciation tax and reducing the assessment when receiving an improvement levy charge. It is important to remember that early tax planning can save the seller a lot of money and not one, after a thorough examination by the lawyer it becomes clear that the seller should wait with the transaction in order to enjoy a fee exemption.
