Exemption from Real Estate VAT for Israel Defense Force Veterans

In the past few months there has been a big debate in the government and the public concerning the high price of apartments and the fact that many people cannot afford to purchase one.

When purchasing an apartment from a construction company, 18% of the price is Value Added Tax (VAT).  It was proposed that if potential purchasers of new apartments from construction companies were to receive an exemption from VAT, perhaps this would enable them to go ahead and buy an apartment.

There has been a public debate about what the exemption conditions should be, who should qualify for it, and whether it would solve the problem or do more damage than good.

In a recent notice to the press, the Government set out the parameters for receiving the VAT exemption.  The main criterion seems to be IDF military service.  This connects to another long standing public debate about whether or not ultra orthodox Jews (Haredim) should do military service.

In the notice to the press, it appears that the basis for entitlement to the exemption is the performance of military service in the IDF.  Someone who served in the IDF will get a full exemption from VAT for apartments up to 1,600,000 NIS.  Those that didn’t serve in the IDF would only receive full exemption from VAT for apartments up to 600,000 NIS.

Which army veterans will be entitled to the exemption?  Married couples (including common law couples) with at least one child, single parents with at least one child under their care, childless couples where at least one is over the age of 35, singles over the age of 35, and disabled individuals with at least 75% disability.

Since Haredim and Arabs do not serve in the IDF, these populations will only be entitled to the VAT exemption for the purchase of new apartments up to 600,000 NIS. Of course there has been a public outcry, on behalf of the Haredim at least, that this new law discriminates against them.  Since this is a blog that deals with real estate I am not going to get into that argument.