August 2017

by Mirit Reif, Adv.

As mentioned in our previous articles on this subject, the Economic Arrangement Bill
(Legislative Amendments to Implement the 2017-2018 State Budget) 5776-2016, was published
by the Israeli government on December 29, 2016. Various tax amendments were made
including the new Third Apartment Tax Bill.
This Bill imposed a tax on anyone who owns 3 apartments and more, at a maximum amount of
NIS 18,000 tax per year, per apartment. The Israeli Tax Authority (ITA) recently postponed the
deadline for reporting and payment under this new Bill until September 1, 2017.
On Sunday, August 6, 2017, the High Court of Justice ruled that Third Apartment Tax Bill
should be revoked after the majority of the judges accepted the position that “there was a
material flaw” in the legislative process. The decision was made by an expanded panel of five
judges, headed by the Supreme Court President Mrs. Miriam Naor, and put an end to the
uncertainty that has gripped the economy in the past months. The 127 page judgment
concludes that the Bill should be returned to the Knesset Finance Committee for a second and a
third reading, since that was the stage in which the flaw occurred.
According to the new Bill, in the event that one sells an apartment up until October 1, 2017,
one will receive a grant up to NIS 85,000 upon certain conditions. The purpose of the grant was
to offset the betterment tax one would pay upon the sale. Now that the Bill has been revoked,
one of the questions that will need to be examined is how to deal with grants that have already
been given due to a sale of an apartment according to the conditions of the new Bill. The ITA
will have to examine this question together with the Ministry of Justice.
The content of this article is intended to provide a general guide to the subject matter and is not a substitute for
legal consultation. Specific legal advice should be sought in accordance with the particular circumstances.