Lawyer in Israël
Lawyer in Israël
The donation is the transfer of the rights of a property to a third party without receiving any compensation. An owner can ‘give’ his real estate property during his lifetime, or ‘bequeath’ it after his death. The tax system for this type of transaction is very liberal in Israel. There is no real inheritance tax to be fulfilled and the tax benefits are very advantageous. However, there are fees as well as certain steps and rules to follow.
Transferring the property rights to a close relative is exempt from the capital gain tax. As for the acquisition tax, it will be reduced for relatives.
Any owner of real estate may decide to donate his property to a third party. Usually, this party is the owner’s relatives, but not in all cases. This is called a donation or transfer without counterpart. A counterpart may be financial, favors, servitude or goods. It is possible to transfer all rights to a property or only part of it.
When it comes to relatives, they are exempt from the tax on the capital gain. However, they must pay the acquisition tax within 60 days of the transaction. The good news is that this tax is reduced to one-third of the value of the property. In the case of a donation between spouses for their common dwelling, the acquisition tax is also exempt. If it is another real estate the spouse will have to pay like any other relatives.
However, note that the definition of the word close differs according to the acquisition and surplus-value taxes. For the acquisition tax this includes spouse, parent, descendant, spouse of a descendant, brother and sister. For the capital gains tax, this includes spouse, parent, parent of a parent, descendant, descendant of a spouse, spouses thereof, brother, sister and their spouses.
Are there any advantages to donating a property? Yes, and the biggest is that it often helps to avoid conflict during an inheritance. When the rights to a property transfers to a third person, it is recorded in the land register (tabu). This is definitive and irreversible. This is a good way to anticipate problems between the heirs during the succession.
Having made one’s will should define unequivocal successors. But a will can always be changed, while a donation cannot be changed, it is an established fact.
This is also an advantage in the case of children from a previous relationship. In order to protect their rights, it is possible to donate. Another way is to write a contract of separation of property. Nevertheless, a court can invalidate this contract, it cannot invalidate a donation.
There are also tax benefits to donations. For example, to reduce the acquisition tax for owners wishing to buy a second property. This means that by donating his first property, the owner will pay less acquisition tax for his second property. Same thing for the tax on the surplus value. It is exempt for the purchase of a first real estate. By donating one of his possessions, he will be able to enjoy the exemption when he sells his property.
In the case of a donation one must always take a notary or a lawyer with oneself. This guarantees the total legality of the transaction. He will also be a witness for the two parties who signed the transfer agreement of the property. As with any other transaction, there are documents to collect and sign for both parties.
A donation agreement (transfer without compensation)
Documents relating to the property and the transaction
The declaration “noten matana” (gives as a gift) that the owner signs
The declaration “mekabel matana” (receives as a gift) that the beneficiary signs
Details of the future of the donation in the event of the death of the donor
Transfer of the donation declaration to the tax authorities and the cadaster
It is possible to donate to a person who is not part of the owner’s family. In this case the donor and the beneficiary will have to pay the full amount of the taxes on the transfer. From the moment the transaction is entered in the land register, it becomes irreversible.
In the case of a transfer of property to a person outside of the family it is essential to have a lawyer with you. This will prove the good faith of the donor, which is very important. The authorities are doing everything to avoid fictitious transfers made with the objective of wrongly benefiting from tax benefits.