Expenses recognized withholding for praise tax
- Buying an apartment in Israel
Deductible allowable expenses are intended to reduce the rate of the appreciation tax. All the expenses in question are financial expenses that were incurred for the purposes of purchasing the apartment or selling the apartment or improving the apartment. Another condition is that these expenses are not deductible under the Income Tax Ordinance.
The law stipulates that in order to determine the amount of the appreciation, expenses incurred in acquiring or selling the right in the land may be deducted if they are not included in the value of the purchase and are not allowed as a deduction under the income tax law.
The reference to the Income Tax Ordinance, and the addition of the words ‘are not permitted under the Ordinance’ is intended to prevent double deductions, such as in the case of an expense for the eviction of a protected tenant which is permissible for deduction under the Income Tax Ordinance, or deduction of interest on her mortgage.
This principle is similar to the principle established for the purpose of depreciation in section 47 of the Real Estate Tax Law:
“(1) All expenses incurred by the seller from the date of purchase until the date of sale, for the purpose of improving the property on which the right is sold; In this regard, the estimated value of work, which was proven to the manager who worked with the owner and his relatives to improve the property, would also be considered an expense, if the cost for that work – if it was worthwhile – could not be deducted under section 32 (4) of the Income Tax Ordinance.”.
The logic in recognizing expenses is that it is not correct to calculate appreciation without considering the financial expenses required for the purpose of improving the apartment.
The permissible expenses are a closed list, and include, among other items, an appraiser’s fee, brokerage fees paid on the date of purchase or the date of sale of the apartment sold, purchase tax on the date of purchase of the apartment sold, real interest payments to mortgage banks for purchase of the apartment. Depreciation when selling the apartment, expansion of the apartment, and more.
It should be emphasized that it is not possible to deduct expenses that the seller was entitled to deduct for income tax purposes. Thus, for example, interest expenses will not be recognized in appreciation tax if the apartment was rented for residence.
The method of calculating the expenses is generally through adding them to the value of purchasing the apartment.
These actions may increase the amount of purchase of the apartment and necessarily reduce the appreciation of the apartment at the time of sale.