How much money does the state lose a year from tax evasion in the real estate sector?

by time news

One of the biggest loopholes in taxation in Israel is the exemption for rent income – people who rent apartments, but do not pay tax on it. Why? So. Like zero VAT in Eilat which economists know how to say is a mistake and like other historical mistakes made in Israel. Economists want-prefer taxation as simple as possible and if they want to give a benefit to a certain population group then give them the subsidy directly and not indirectly.

The more you complicate the tax issue, it creates new jobs for tax planners-accountants-tax consultants, i.e. people who will find a way to bypass the income tax. Then the state has to hire more workers to find all the tax evaders, who in turn look for more sophisticated ways to evade the tax. Or in short – a complete activity that has no reason and no need for it. Cat and mouse games that arise because of complexity and discrimination in tax legislation.

In any case, in the Israel of 2022 there is an exemption for rent income of approximately NIS 5,200 per month. That’s a lot of money. (The amount of the exemption is expected to increase at the end of the year. How many take advantage of it? 350,000 families in Israel have at least two apartments. A little less than 80 thousand of them have three or more apartments. How many renters and do not pay tax? No one knows. There are no numbers, the tax authority has no information or answers. But it is clear that this is a loss of billions of shekels for the economy. Those who benefit from this exemption are precisely the established strata in Israel (after all, who has several apartments here?).

The total scope of the exemption – NIS 5 billion
It is estimated that the total scope of the exemption is NIS 5 billion. A benefit, think of it as a gift that the landlords receive. If they were taxed like any other channel, they would have to pay an additional NIS 5 billion. In practice, they are estimated to pay less than half a billion shekels. In addition to the fact that there is an exemption for rent that is up to 5,200 NIS, there is an option in the tax regulations to pay a reduced tax even if the rent is over 5,200 NIS – you pay a tax of 10% on the entire rent or a tax according to the wage tax rate on twice the difference. For those interested: calculation and explanation of tax payment options for apartment renters.

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So there is a very significant exemption and there are still tax evasions. People who rent an apartment above the ceiling by law, have to pay an extremely low tax and decide not to report it. There are those who simply do not report, without wisdom, without concealment. There are others who register the apartment in the son-daughter’s name and act as if the apartment is not theirs.

This offense is perceived by the public as a minor offense. The lessor forgot to report, the calculation of the tax is complicated; Well, what does it matter, even so the payment is low. Claims of many who were caught – “I didn’t know”. But it’s a big crime, it’s a total tax evasion of many hundreds of millions. This is also a very infuriating young lady – we gave you a huge benefit and you are not ashamed and you don’t even pay the little you have to pay.

The tax authority has been following them for several years and is gearing up. Since the beginning of the year, hundreds of landlords have been caught evading taxes. Not only did they pay the tax evasion they also paid the fines for the offense. It is also worth remembering that the parents of Hadar Mokhtar had to pay tens of thousands of shekels (about 66 thousand shekels) to the income tax following the outburst of their daughter, who actually admitted on the broadcast that her family was evading taxes. The mayor of Ramat Gan, Carmel Shama HaCohen, is also suspected of evading taxes in the field of real estate of more than a million shekels.

So if you invest in apartments and register the apartment in the children’s name to avoid taxes – you have been warned. Here is a guide on everything you need to know about buying or moving an apartment for children, how much tax there is in the process and how you should do it right (for the full guide – click here).

And also – a large population thinks it is doing the right thing because it is both a landlord and a tenant. But even in this case, if the rent exceeds the threshold in the law, she has to report and pay tax – see guide

In the meantime, here are real estate transactions from the past week:

Jerusalem
A 5-room apartment on Eliezer Shiloni Street in the slopes of Mashoa, 135 square meters + 18 square meters of balcony + 4 square meters of storage, floor 12 out of 17, with elevator, parking, sold for NIS 3.75 million

3-room apartment, Lincoln Street, Talvia neighborhood, 80 square meters, floor 1 of 7, parking, elevator, sold for NIS 3,700,000

3.5 room apartment, 29 November Street, Katmon neighborhood, 79 square meters, 2nd floor out of 3, sold for NIS 3,275,000

3-room apartment, Bar Kochva Street, French Hill neighborhood, 66 square meters, 1st floor out of 5, sold for NIS 2,090,000

streets
A 3-room apartment on Yehiel Peladi Street, 75 square meters + 8 square meters of balcony, warehouse, floor 4 out of 8, with parking, elevator, sold for NIS 2.195 million.

Beer Sheva
5-room apartment, on Bezalel Street, 167 square meters, balcony and storage, floor 17 out of 22, with elevator, with storage, sold for NIS 1.8 million

Tel Aviv
4-room apartment, Monash Street, Yad Eliyahu neighborhood, 82 square meters, 3rd floor out of 4, sold for NIS 2,920,000

3-room apartment, Hagivor Elamoni Street, Yad Eliyahu neighborhood, 80 square meters, floor 5 of 8, elevator, sold for NIS 3,180,000

5-room apartment, Nissim Aloni Street, Tzameret Park neighborhood, 135 square meters, 15 square meters balcony, 15th floor out of 28, parking, elevator, sold for NIS 7,400,000

Haifa
4-room apartment, Wedgwood Street, Carmel Center, 90 square meters, 3rd floor out of 3, sold for NIS 1,500,000

4-room apartment, Albert Einstein Street, Givat Downs neighborhood, 100 square meters, 3rd floor out of 3, parking, sold for NIS 1,385,000

Holon
2-room apartment, Sokolov Street, 70 square meters, 3rd floor out of 3, sold for NIS 1,570,000

3-room apartment, Weizman Street, 85 square meters, 2nd floor out of 2, sold for NIS 2,010,000

Rishon Lezion
5-room garden apartment, Yaakov Ben Sira Street, 125 square meters, garden 130 square meters, ground floor out of 8, double parking, elevator, sold for NIS 4,340,000

Ashdod
an apartment 4 Rooms, IDF St., the City district, 145 square meters, balcony 17 square meters, floor 11 out of 40, parking, elevator, sold for NIS 3,263,000

5-room garden apartment, Jeroboam Street, 13th district, 125 square meters, garden 80 square meters, ground floor out of 4, parking, sold for NIS 2,920,000

3-room apartment, Ma’afilim Street, 2nd district, 72 square meters, 3rd floor out of 4, sold for NIS 1,534,000


The data was collected from Rimex, Anglo Saxon and the Tax Authority data.

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