The new government announced that it will act in an accelerated procedure for the continuous application of the bill to extend the tax benefits for TMA 38 - until the year 2026. This is in order to create certainty for entrepreneurs who manage TMA 38 projects without the knowledge that they are indeed financially viable.
We remind you that at the end of December 2021, the validity of the tax benefits in TAMA 38 transactions expired. Since then, several attempts have been made to extend the benefits through legislation, but due to the replacement of the Knesset, the validity of the benefits was not extended and created feelings of uncertainty around the issue, which hurt the entrepreneurs, who continued to sign New transactions knowing that if the tax benefits have not been extended, the full tax will be paid by them. These are sometimes high amounts that make the projects unprofitable.
In addition, the Tax Authority published a decision in August 2022 that allowed tenants and entrepreneurs to sign agreements to carry out transactions pursuant to TAMA 38, and to be content in the initial stage with submitting a notice of the execution of the transaction, without submitting a statement requiring the payment of sales tax and purchase tax. Since the decision was valid until October 2023, it was This is only an interim solution, which only increased the lack of acknowledgment.
TMA 38: The tax benefits are the ones that most often create the economic viability for promoting the projects (Photo: ShutterStock)
As mentioned, TMA 38, the national outline plan for strengthening existing buildings, is based on the provision of tax benefits to tenants and entrepreneurs, with these benefits often creating the economic viability for the promotion of the projects.
Attorney Shmuel Shub, managing partner at the firm Shub & Co., notes that "in the framework of TMA 38 transactions, the tenants of the building actually sell the developer the additional construction rights in the building, in exchange for strengthening the building or demolishing it and rebuilding it.
In order to speed up the transactions, the real estate taxation law stated that the apartment owners are entitled to a significant reduction in the payment of appreciation tax, on the consideration given to them by the developer for the additional construction rights.
I hope that indeed, in light of the government's decision, the legislation will be accelerated and will return to the market the certainty that will allow us to continue signing deals to strengthen buildings."