Israel cleans up property-tax mess

Until now, Israel’s claim to be a property-owning democracy had to be taken with a dose of salt. In the World Bank’s annual survey of doing business in 190 countries in 2017, Israel is No. 54 overall (www.doingbusiness.org/rankings).

But when it comes to property registration, Israel is miserably ranked No. 126, well behind mainland China (No. 42), Turkey (No. 54), Romania (No. 57), Iran (No. 86), Sudan (No. 89), West Bank and Gaza (No. 93), Jordan (No. 96), Mexico (No. 101), Egypt (No. 109) and Indonesia (No. 118).

Not far behind us is Somalia (No. 148) and Syria (No. 154). Worst in the world for property registration are Afghanistan (No. 186) and Libya (No. 187), according to the World Bank.

With a view to digging itself out of this embarrassing Third World-minus ranking, the Israel Tax Authority (ITA) proudly announced on July 2 that it is launching a new service improvement.

Lawyers representing clients who conduct real-estate transactions may now obtain tax confirmations needed to register the conveyance at the land registration bureau (the Tabu, a Turkish word apparently) directly on the computer in their office without having to show up in person at the real-estate taxation department.

Until now, after real-estate tax officials finished dealing with real-estate tax assessments (usually self-assessments) filed, lawyers had to wait “a number of weeks” to receive confirmation of registration of the transaction at the Tabu by mail or to make a trip to the relevant Tabu office to receive the confirmation manually. Hence the Work Bank ranking.

On the legislative side, the Knesset Finance Committee passed new regulations on July 11 that should enable the taxpayer’s lawyer to receive the tax assessment number online and print a tax payment slip enabling payment at a post office by credit card or bank transfer.

In parallel, online filing of taxpayer declarations should facilitate assessment procedures.

Online reporting of real-estate deals has been voluntary the last two years, but it will become mandatory on December 1.

To further improve efficiency, if there are problems obtaining the tax confirmation, the lawyer can use the system to contact a national real-estate tax help desk, which will hopefully address the problem immediately. The ITA also provide lawyers with training regarding the new system.

Comments

This all seems to be a step in the right direction, but time will tell. Accountants already have access to a separate online ITA system known as Shaam, but it often takes several weeks to register an accountant as the authorized representative of a taxpayer. An online registration form has to be printed, signed and handed in at a tax office and processed by the tax office.

Let’s hope lawyers get a better registration deal than accountants from the ITA, otherwise Israel may stay stuck at No. 126 in the World Bank’s rankings.

There is no mention of speeding up the time taken by tax officials on the tax assessments nor on the rest of the property-title conveyancing process

Furthermore, the World Bank survey ranks Israel No. 71 for getting construction permits and for getting electricity and No. 89 for enforcing contracts. When it comes to paying taxes, Israel is No. 96. Unfortunately, there is no mention of Israel improving any of these processes.

Which country is in first place for nearly all these business processes? None other than New Zealand – another country with laws originating in the UK and a slightly smaller population of 4.6 million.

As for the new three-or-more home tax, uncertainty still prevails. The Israeli High Court of Justice (Bagatz) has yet to rule whether the tax was passed too hastily by the Knesset and what should be done.

As always, consult experienced tax advisers in each country at an early stage in specific cases.