Price of the apartment for tax purposes
- Buying an apartment in Israel
The rule guiding the real estate tax authorities is that the price of the apartment is the price agreed in the contract, but only after the real estate tax administrator is convinced that the consideration agreed by the parties to a written sale agreement was determined in good faith and without its scope affected by special relations between the parties.
It should be noted that the sale amount for a residential apartment is calculated not necessarily according to the amount written in the contract, but according to the amount to be expected from the sale of the same right by a willing seller to a willing buyer. In other words, the ‘market value of the residential apartment.
This definition is intended, of course, to prevent fraud against the tax authorities in which the parties write in the contract a false sum of the price of the apartment, out of a common desire of both parties to evade tax payments. However, the clause can also be used as a ground to deduct from the ‘price of the apartment’ the movables or other contractual rights, which are sold together with the apartment.
Although the profit derived from the movable objects may be subject to capital gains tax under the Income Tax Ordinance.