Blog / Private Client
It is not common knowledge that officers of companies who customarily disseminate advertising messages in a manner that constitutes a violation of the Israeli Anti-Spam Law are personally exposed to lawsuits, even to class actions at millions of shekels.
All You Need to Know about Receiving Brokerage Fees in a Transaction
October 4, 2018 / by Gal Livshits
October 4, 2018 / by Gal Livshits
Here are a few rules of thumb to make it easier for you to receive the brokerage fee payment and to make it harder for your clients to evade such payment.
What to Know When Purchasing or Renting Out Property in Israel
August 16, 2018 / by Liat Keisary Yahalomi
August 16, 2018 / by Liat Keisary Yahalomi
Purchasing property is Israel is a complex process, especially for non-residents. It’s important to consider what type of property you want to buy, as well as to be aware of the multiple steps involved, including engaging an attorney, conducting negotiations, and paying the purchase price and accompanying taxes.
Few Good Reasons Why You Should Consider Making Aliyah
April 20, 2017 / by Liat Keisary Yahalomi
April 20, 2017 / by Liat Keisary Yahalomi
What do the United States, the UK, France, Germany, Italy, Spain, Switzerland and the Netherlands all have in common? In these countries (and many others), estate tax is collected on large inheritances. These taxes are imposed not only on the money of the deceased, but also on their real-estate properties, shares, pension funds, and other assets. In recent years, there has been a shift towards expanding the scope of these tax collections. An example of this can be found in the UK. On April 6, 2017, an amendment will take effect that expands the scope of the estate tax on trusts, or on individuals with residential properties in the UK. The major impact of the new amendment is that now it will also apply to individuals who live outside the UK, to trusts with beneficiaries outside the UK, and to directors of foreign companies that own residential property in the UK. In Israel, on the other hand, the estate tax was cancelled in 1981 and in recent years there has been a string of benefits granted to every new immigrant or returning resident that decides to leave it all and move to Israel. On January 1, 2007, income tax reforms creating tax cuts for new immigrants and returning residents, took effect retroactively. The reform creates a ten-year tax exemption and reporting exemption in Israel. Are you entitled to benefits? First of all, to clarify: a new immigrant/first-time Israeli resident is a person that becomes an Israeli resident that has never been an Israeli resident before. In contrast, a returning resident is a person that becomes an Israeli resident again, after residing outside of Israel for ten consecutive years. Do you belong to one of the categories above? If so, in addition to other benefits, you are entitled to the following: Capital gains derived from abroad- a tax exemption on capital gains from the sale of assets outside of Israel, as long as they are sold within ten years of the date you became an Israeli resident - regardless of the date of purchase. Passive income derived from abroad - a tax exemption, lasting ten years from the date you became an Israeli resident, on passive income, such as interest, dividends, pension, and royalties produced or generated outside of Israel. Active income derived from abroad - a tax exemption, lasting ten years from the date you became an Israeli resident, on active income - i.e., income from work or business - produced or generated outside of Israel. Beyond these benefits, new immigrants are also entitled to a discount on the purchase tax for property purchased in Israel during the period beginning one year prior to their immigration and continuing for seven years after their immigration. The immigrant purchase tax rate, starting on January 1, 2017 until January 15, 2018 is: 0.5% on the portion of the property’s value that is up to approximately NIS 1,759,310; 5% of the portion of the property's value above approximately NIS 1,734,225. Note that this benefit may be exercised once for a residential apartment, and once for a business oriented property. It is important to remember that after ten years, a reporting requirement for income from abroad goes into effect. Since the reform only went into effect in 2007, issues are only just starting to emerge for which answers haven’t been provided yet, such as the exposure for retroactive payments - with emphasis on national insurance payments - and exposure from the tax authority. Have you started packing? Source: barlaw.co.il
Purchasing a residential property is generally one of the most profound, expensive and important decisions you make in your life. Even more so when purchasing a residential property in Israel. Following is a check list containing 10 most important tips on how to do it the right way: 1. Locating the right property- there are a few ways to proceed. The first way is via various web sites, which usually do not involve payment of a fee. Another way that is more common is via a real estate agent. It is important to confirm that the agent has a valid real estate license and is proficient in English. You must be aware that purchasing a property using a real estate agent increases the costs of the transaction as the agent’s fees range between 1% to 2% (V.A.T exclusive) of the purchase price. However, this extra cost can prove to be worthwhile, especially when dealing with a professional, experienced agent who has a thorough knowledge of the property market. 2. What to buy - it is very important to understand what you want to buy, for example a house or an apartment, whether to buy an apartment off plan (or under construction) from a contractor or to buy a finished apartment. Your choice to buy an apartment or a house can have important consequences. It is important to know that when purchasing an apartment from a contractor (off plan or under construction) there may be many unforeseen problems (such as late delivery, structural defects, financial problems of the contractor etc.). But the advantage of buying an apartment from a contractor is a lower purchase price (approx. 15%) when compared to a pre-existing property. Also, you can buy the apartment in a “shell” condition and design it to fit your personal requirements. 3. Property inquiry - it is very important to engage an engineer or similarly qualified professional. to check the quality of construction and to make sure there are no building irregularities. If you wish to buy a house it is important that you have its size measured to ensure that the correct specifications are recorded with the authorities, such as the Land Registry. 4. Engaging with the right lawyer - it is extremely essential that you engage a competent, experienced lawyer to represent you. It is vital that you are guided and assisted throughout the process, from the negotiation stage until the conclusion of the transaction, by a lawyer who will both protect and advance your interests. The lawyer’s fees generally range between 0.5% to 1.5 % (V.A.T exclusive) of the purchase price. 5. Financing - the purchase price for the property can be paid fully in cash or via a combination of cash and mortgage finance. Usually the lender will grant a non-resident a loan which will not exceed 50% of the purchase price. Receiving approval for mortgage funding from local banks for non-residents cannot be taken for granted and is not always successful. 6. Signing the contract - it is important to know that the provisions of the contract are negotiable and are not “cast in stone”. All the necessary legal checks in respect of the property should be carried out prior to the signature of the contract. For example, whether there any existing property mortgages, foreclosures or anything else that could affect the transaction. It is important to ensure that the structuring of payments under the contract is reasonable and attainable. 7. Receipt of possession -it is very important that at the time of delivery of the property the seller and buyer have drawn up a delivery protocol, which will specify any defects which need to be remedied by the seller. At the time of delivery you should arrange for the transfer of all utilities, rates accounts into your name. 8. Taxes - currently, non-residents are required to pay purchase tax of 8% of the purchase price up to NIS 4,896,165 and 10% of the purchase price which exceeds NIS 4,896,165. 9. Opening a bank account- in recent years the requirements for opening a bank account by non-residents have become quite stringent. The bank requires the foreign resident to sign a waiver of confidentiality towards the Bank, a statement about the place of residence and a deposit of a cash amount in the account. Alternatively, you can arrange for your lawyer to open a trust account to effect payments. Please note that opening a trust account will entail the signing of similar documents as are necessary when opening a personal bank account. 10. Post Purchase Issues- (I) Receipts - upon a subsequent sale of the property, you may have to pay Capital Gains Tax. However, for this purpose you are entitled to deduct various expenses, such as renovations, purchase taxes, legal fees, agent’s fees etc. It is therefore critical that you retain all relevant receipts, which must be under your name and must include all relevant details relating to the property and of course, keep a copy of all taxes paid upon the purchase as well as the purchase agreement and your passport.(II) Insurance - you must insure the property and its contents. Non-residents who do not intend to occupy the property on a continuous basis should ensure that someone inspects the apartment once every two weeks, otherwise the premiums will be more expensive and in some cases insurance cover may be refused. (III) Taxes - if you intend to rent out your property to a third person, you have a duty to report your income to the Israel Tax Authority if the rental exceeds approx. NIS 5,070 per month. Source: barlaw.co.il
So you posted on Facebook that you’re looking for a place to live. You read the fine print of every ad on yad2.co.il. You asked everyone – from your grandmother to your elementary school bestie – for help, and you were probably one of 50 people who showed up to see the place. And now the place is yours for the asking! But before you commit, make sure to check these tips so that in the future you don’t regret signing the lease: Working with a realtor: Before signing a letter of engagement with a real estate agent, make sure that: The realtor holds a valid real estate license. The letter of engagement you sign specifies the rent (i.e., monthly payment), the lessor (i.e., the property owner) and the term (i.e., time period) of the lease. The tenant pays the realtor’s fee only after s/he has signed a binding lease with the lessor. If the lease depends on certain conditions being fulfilled, it is important that you demand that your obligation to the realtor be binding only if those conditions are met and that you pay the realtor’s fee only after the conditions have been met in a timely fashion and the term of the lease has begun. Inspecting the property and its surroundings: Before signing the lease, we strongly recommend that you, the prospective tenant, inspect the property thoroughly. This includes checking all systems, such as the AC, water heater, the electrical system, electric blinds, and so on. It is also important that you make sure there are no water stains or drips and leaks. We recommend you bring another person to the inspection so that you can hear a second opinion about the property. It is also important to find out about ambient noise levels, determine if renovations or construction are planned in the immediate neighborhood, and check for cross ventilation. Also, talk to the neighbors and see if any of them is planning or is in the midst of renovations, including enhancing the building’s earthquake resistance (National Construction Guideline 38, abbreviated in Hebrew as TAMA 38). The lease: We recommend the lease includes the following: The lessor’s information and his/her rights to the property (it is important to make sure the lessor actually owns the property and is therefore entitled to rent it to you). The term of the lease as well as an option to extend or renew it. It is important to make sure that the option is solely in your hands, rather than jointly or solely in the lessor’s hands, otherwise it’s pointless. The rent for the term of the lease (including any annual escalations) and for the extension option if offered to the tenant. The possibility of leaving before the term of the lease is over and/or the possibility of sub-letting the property and/or finding an alternativ tenant to take over the lease in every way. It is important that the lease includes the lessor’s agreement to allow the tenant to terminate the lease without any penalty should the need to renovate and/or participate in a TAMA 38 project suddenly arise. When the term of the lease begins and the tenant receives the keys, the parties should sign a memorandum in which the tenant states the flaws and/or damage to the property that the lessor is obligated to repair. Lease guarantee: It is necessary to come to an agreement on the nature of the guarantee the tenant must provide. In most cases, this involves a deposit or bank guarantee equal to three months’ rent, or, alternately, a promissory note equal to six month’s rent. It is necessary to make it clear in the lease that the lessor may use the guarantee only if the tenant has breached the lease and the lessor has informed the tenant of this in writing and has also provided a window of a few days to redress the breach. It is important to note that the demand for a guarantee is negotiable between the parties and it is important to clarify the terms up front. Insurance: It is important to make sure the lessor has purchased a structure insurance policy. It is customary for the tenant to purchase a third party and house contents insurance policy. We recommend checking the cost of purchasing such a policy. Contents: Find out ahead of time if the property is being rented together with any contents. If it is, a list of the contents and its condition should be drawn up. It is important to clarify this point during the negotiations so that the tenant can plan accordingly (i.e., demand that the contents be removed once the term of the lease starts or, alternately, inspect its condition). Reasonable wear and tear: It is important that the lease include the lessor’s obligation to undertake repairs to the property needed as the result of reasonable wear and tear that occurred despite the tenant’s reasonable use, as well as the time frame in which such repairs can be expected. It is also important to make sure the lease includes a clause stating that the lessor’s failure to fulfill this obligation entitles the tenant to choose a service person to make those repairs and to demand the lessor provide a full refund for the expense incurred. Lease breach: It is important that the lease contain a clause stating that a claim that the tenant has breached the lease must be submitted in writing by the lessor who must also provide several days for the tenant to redress his/her breach. Tip: Before signing a long-term lease involving a significant monetary commitment, it is important to consult an attorney specializing in this field. Such an attorney can draw up the contract, conduct the negotiations, and ensure that your interests are safeguarded
In recent years, more and more couples are opting to live together without getting married, for a variety of reasons. The State of Israel has enacted clear laws addressing the division of property for instances when couples who are legally married decide to separate; however, if a couple decides to not be formally married, they are deemed a “common law couple,” and then matters become more complicated. Property rights of common law couples, in the event of a separation or, heaven forbid, if one of them dies, are anchored mainly in case law and not in legislation. In Israel, unlike in many other countries, the term “common law couple” is neither defined nor uniformly regulated in legislation. In Israel, the definition of a “ common law marriage” has evolved over the years within the scope of court rulings, which prescribed two main criteria for recognizing a common law marriage: (a) intimate conjugal relations as a husband and wife, in a manner that shows that the couple indeed consider themselves a married couple for all intents and purposes; (b) cohabitation – the intention is not co-running of a household that derives from some need (financial, personal, convenience, etc.), but rather, a full domestic partnership as the natural outcome of two people who choose to join their destinies. Furthermore, the duration of the couple’s cohabitation is irrelevant; the couple’s intention is what matters. It is important to keep in mind that the court will deliberate each case on its merits according to its specific circumstances, analyzing the entire set of facts with the aim of understanding how the couple categorized their relationship. The courts take a flexible approach when ascertaining whether the couple should be deemed in a common law marriage, since the court is cognizant of the fact that no two relationships are alike and each couple’s shared domestic lives have unique characteristics. Have you separated? It is important to know that, when it comes to transferring rights in a shared residential apartment between spouses after they separate, common law couples benefit from the same reliefs as those that apply to a legally married couple. The salient point here is that a transfer of these rights is not deemed a real-estate transaction and therefore, is not subject to tax. Section 55 of the Inheritance Law expressly refers to common law couples and prescribes that the testator is deemed as having bequeathed to the surviving (common-law) spouse whatever the surviving (common-law) spouse would have received as an inheritance by law had they been legally married to each other. Also, the surviving spouse may sue for alimony from the deceased spouse’s estate. Sharing of assets – beyond the rights pursuant to inheritance laws, common law couples are exposed to a situation whereby one of the two attempts to apply the ‘presumption of sharing’ to their relationship when the couple separates, claiming that the assets accumulated during their cohabitation should be deemed the couple’s ‘common property’ for all intents and purposes. The intention here, when referring to “accumulated assets” during the period of their common law marriage, is the real-estate assets, corporate stocks, options and any other property. About two years ago, a judgment was handed down by the Family Court in Haifa, which recognized a woman as the common-law spouse of the deceased for the purposes of section 55 of the Inheritance Law, despite the fact that they had not been living together on a permanent basis and, prima facie, failed to satisfy the second criterion: co-running of a domestic household. The woman succeeded in proving that the couple had regularly maintained family life and that their intention had been to formalize their relations. The court ruled that that the concrete case must be considered after examining the couple’s subjective intention regarding the formalization of their relationship and the steadiness of the relationship and, therefore, the court recognized the woman as the deceased’s common law wife for the purposes of the rights to the inheritance. We clarify that at issue is the ruling of the court of first instance and an appeal has not yet been filed. If you are a common law couple and want to avoid disputes and disagreements that end up in court, we recommend drawing up and signing a non-marital conjugal cohabitation agreement to keep assets separate and to regulate and anchor your rights and obligations as a couple in a common law marriage during the period of your relationship and in the event of a later separation. It is also recommended to have this agreement ratified by a family court. We also recommend that both spouses prepare a last will and testament to regulate the division of each of their estates.