The Commissioner of Budgets, Yogev Gerdos: supports the abolition of purchase tax on land and development in the upcoming term

Are you expecting good news in the real estate market? The Association of Contractors Boni Ha'aretz congratulates: "The purchase tax is contrary to all logic and should be canceled as soon as possible"

Ofer Petersburg

06/10/2022

Thursday, October 6, 2022, 3:50 p.m. Updated: 5:03 p.m.

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Yogev Gerdos, the budget supervisor at the Ministry of Finance (photo: Treasury spokespersons)

In accordance with real estate taxation regulations - currently a 6% tax is imposed on land and development levies in every land transaction.

That is, all branches of the economy have a VAT regime of 17%, while in the construction and real estate sector the taxes reach 23%.

Also, the developer is required to pay the purchase tax immediately upon purchasing the lot and signing the agreement with the Israel Land Authority.

The purchase tax on the lot is on the land only, there is an addition on the actual development percentage in the part of the land development.

We will remind you that last March the Supreme Court ruled that development expenses should not be included in the sale of land for tax purposes.

This ruling was defined by experts as important news for the real estate market, as it means that real estate developers who buy land will pay less purchase tax - which will also have a positive effect on the price paid by the apartment buyers, who would necessarily have the additional tax passed on to them.

The abolition of the purchase tax on land and development will be a significant and decisive step in lowering housing prices in Israel that many wish for.

Haim Feiglin, vice president of the Boni Ha'aretz Contractors Association:

"A 6% purchase tax on land, and even more so on development levies - is a burdensome barrier to an increase in construction starts and the supply of apartments in Israel. Moreover, it significantly increases the price of the most critical resource in the construction chain, Land and development. In the end, the purchase tax on land and development is rolled over to the apartment-buying public at least twice as much, embodying all financing expenses, overheads and profit. This tax increases the costs of building apartments and apartment prices significantly. We welcome the Commissioner's position On the budgets in the Treasury, Yogev Gerdos, that the purchase tax on land should be abolished as well as any indirect tax imposed on the means of producing apartments in general. In contrast to the purchase tax on apartments, which was imposed, among other things, to "cool down" the demand for apartments and is also wrong in our opinion - the imposition of a purchase tax On land and development "cools down" the supply of apartments and thus goes against all logic and should be canceled as soon as possible."

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