The increase in purchase tax for real estate investors to 8% is expected to take effect in two days, not on July 1, as previously decided, according to a compromise reached today in the Knesset Finance Committee. The compromise was proposed by Ministry of Finance director general Shai Babad, who said that the rise in the property tax rates should date from law's publication date, in other words, two days from now.
Babad said, "We aren't trying to do anything sneaky, but there's a mass of investors rushing to buy apartments, the supply of apartments is limited, and we don't want all the apartments to be snatched up by investors in the last nine days of the month, with none left for young couples."
The increase in the purchase tax rates, initiated by Minister of Finance Moshe Kahlon, is slated for Its second and third Knesset readings two days from now.
A legal dispute, however, is liable to end in the state making refunds to purchasers of apartments for investment who paid high purchase tax rates this year before the passage of the law in two days. According to the amendment, it is being proposed to retroactively authorize the high tax rates prevailing since January 1, 2015 under a temporary order. This temporary order was due to expire on January 1, but owing to the fact that expiry took place during an election campaign, it was automatically extended under Section 38 for three months starting when the government was sworn in, in other words until June 30. Legal experts, however, believe that the temporary order was illegal, because it was not approved by the Knesset Finance Committee.
According to Ministry of Finance housing coordinator Maayan Nesher, who represented the ministry in the Knesset Finance Committee, a 1% rise in purchase tax will reduce the number of investors buying an additional apartment that is not their place of residence by 10%.
Published by Globes [online], Israel business news - www.globes-online.com - on June 22, 2015
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