Purchase Tax Refunds
Heres how I got two large purchase tax refunds for a client.
A few years ago, I represented a woman from the US who purchased two apartments in Israel. The first apartment was purchased in January 2019. The second apartment was purchased a few months later.
Before the end of the year my client made aliya and settled down to live in the second apartment. She rented out the first apartment to tenants. I helped her with the rental agreement.
After waiting 6 months after making aliya, when she could show that she established residency in Israel, I applied for her for a tax refund for part of the purchase tax that she paid. Why did I do this?
When she purchased the first apartment she was still living in the US. This made her a foreign resident in the eyes of the Israeli land tax authorities. This means that even though she did not own any other apartment in Israel at the time of the purchase, she paid a much higher purchase tax than an Israeli buying an apartment where they did not own another apartment in Israel.
The law states that if such a purchaser makes aliya within a year of signing the purchase agreement, and really establishes residency in Israel, then this purchaser can apply for a refund of part of the purchase tax. What this means is, the tax authorities will refund the difference between the lower purchase tax and the higher purchase tax.
To do this, she needed to make aliya within the year and establish residency for 183 days. This she did. So, we were able to apply for the tax refund. She received a refund of 183,000 NIS.
Now on to the second apartment.
The second apartment was purchased several months after the purchase of the first apartment. She was still a foreign resident at the time of this purchase, so she paid the higher purchase tax. Also, this was not her only apartment so she would not have been entitled to the lower purchase tax of an Israeli purchasing their only apartment, even if she was already living in Israel at the time.
However, the law gives a partial exemption from purchase tax to new olim. This partial exemption is given to olim even if they own another apartment. They can get this partial exemption within 7 years of making aliya.
I applied for a partial refund of the purchase tax paid on the second apartment using this clause in the law. My client got a refund of 202,000 NIS.
These refunds from the purchase tax bear interest of 4% a year and are also linked to the consumer price index. Best savings account in the country.
If you purchased an apartment less than 4 years ago and paid a high purchase tax perhaps you too are entitled to a partial refund.