Transferring property ownership between close family members in Israel is a common procedure known as a “gift transfer” or ha’avara l’lo tmura (a transfer without consideration). This process is different from a standard sale and offers significant tax benefits, but it must be handled correctly by a real estate lawyer.
The main advantage of transferring property as a gift to a close relative is the major discount on the purchase tax (Mas Rechisha). Instead of paying the full tax rate (which can be 8% or more), the recipient pays only one-third (1/3) of the full purchase tax. To qualify for this benefit, the transfer must be between specific relatives, including spouses, parents, children, grandparents, grandchildren, and siblings (only if the property was received as a gift or inheritance from a parent or grandparent).
Furthermore, the person giving the property as a gift is often fully exempt from capital gains tax (Mas Shevach), provided they meet certain conditions and a “cooling-off period” is observed. This period dictates how long the recipient must hold the property before selling it without incurring additional tax liabilities for the giver.
The Process:
- Hire a Lawyer: Both parties must be represented by a lawyer specializing in Israeli real estate law to draft the necessary documents.
- Sign Declarations: The giver and receiver sign a gift affidavit, declaring the property is being transferred without any monetary exchange.
- Report to Tax Authorities: The transaction is reported to the Israel Tax Authority within 30 days. Your lawyer will file the necessary forms to claim the tax exemptions and discounts.
- Update the Land Registry: Once tax approvals are received, the final step is to update the ownership records at the Israel Land Registry Office (Tabu).
Understanding the process for transferring property between family members can save you a substantial amount in taxes, but it is crucial to seek professional legal guidance to ensure all regulations are met.
