It’s been a busy week in the tax world. Greece is teetering on the brink of default caused in part by a dislike of paying Greek taxes.
On this side of the Mediterranean, the Israeli government seems keen to sort out gas production problems. That will mean more energy for Israelis and allow the government to tax gas profits for many years to come, once an investment payback formula is satisfied.
On June 24, the Knesset passed an amendment which increased acquisition tax on Israeli home with immediate effect. This came as a big surprise as changes were expected only a week later on July 1. The main change is an increase in the acquisition tax on homes in Israel which are not the only home owned by the purchaser, from 5%-7% to the following rates:
- 8% on the first NIS 4,800,605
- 10% above this value.
Previously, these rates stood at 5% – 7%.
Also, the Knesset took the opportunity to fix some typos in the law regarding acquisition tax on only homes in Israel. Unfortunately, other typos apparently remain in the ITA’s website – we hope they will be fixed soon. Subject to this, it seems that home purchasers can expect the following acquisition tax rates if applicable conditions are met:
- 0% on the first NIS 1,568,000
- 3.5% on the next slice to NIS 1,860,790
- 5% on the next slice to NIS 4,800,605
- 8% on the next slice to NIS 16,002,015
- 10% above that
As for Olim who buy a home from one year before their Aliya to seven years after it, the acquisition tax rates are expected to be:
- 0.5% on the first NIS 1,700,220
- 5% above that.
Comment: It remains to be seen if these changes will take the edge of house price inflation.
On June 29, the Israeli Tax Authority again extended the deadlines for certain trusts, this time December 31, 2015. The deadlines were due to expire a day later on June 30.
This applies to:
First, transitional “amnesty” arrangements – for the years 2006-2013 – for “foreign resident settlor trusts”. This procedure is intended is to resolve doubts about beneficiary “control or influence” and/or to get a step-up of the trust assets to their market value at the end of 2013. If the amnesty is elected, there is a choice between 6% of trust capital or regular income tax on trust income in 2006-2013 discounted by 1/3 or more sometimes.
Second, Relatives’ Trusts – for 2014 onwards – notification and choice between Israeli tax of 25% of income when derived, or 30% on income when distributed;
Although the time extension gives more time, we still recommend that action be taken soon given the summer vacations, High Holy Days and December holidays….
The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.
As always, consult experienced tax advisors in each country at an early stage in specific cases.