A ruling was recently published by the Appeals Committee, which operates in conjunction with the Haifa District Court, in the case of Mivne Real Estate (K.D.) Ltd. v. Haifa Real Estate Taxation Manager, which dealt with a purchase tax assessment relating to the acquisition of shares in a real estate corporation. Although the ruling was rendered in this specific context, its chief importance is rooted in a principled determination that has far-reaching implications: a Real Estate Taxation Manager (the RET Manager) has no authority to amend an assessment and disregard the declared value as determined by the parties, without substantive, and concrete reasoning. This applies even when special relations exist between the parties to the transaction.
At the heart of the ruling lies the Appeals Committee’s determination that the amendment to the assessment as made by the RET Manager, has no standing, since it was not supported with sufficient reasoning, nor substantiated with an appropriate evidentiary framework. In making its determination, the Appeals Committee emphasized that the very existence of special relations between the parties to the transaction does not justify, in and of itself, deviation from the contractual consideration as agreed between them. Furthermore, in order to substantiate intervention in the reported value, the RET Manager must demonstrate that the special relations between the parties did in fact impact the price as determined by them.
In this context, the ruling reinforces the standard of examination and reasoning to which the Israel Tax Authority (ITA) is subject. Judge Weinstein held that it was insufficient to provide a general reference that this entailed related parties, but rather requires a detailed explanation as to why the objective evidence as presented by the taxpayer does not reflect the market value. Specifically, the Appeals Committee maintained that the RET Manager did not furnish a relevant reason for rejecting the appraisal that was prepared in real time for a lending bank for the purpose of financing the transaction—an external appraisal that was prepared within the ambit of regular commercial dealings and unrelated to the tax dispute. No less important, the Appeals Committee clarified that also the reliance by the RET Manager on a decisive assessment, that was prepared in relation to an adjacent property, was also of no use in this case: it was not proven that that assessment was relevant to the circumstances of the transaction at issue, and in any event it was insufficient to substantiate amendment of the assessment nor could it serve in lieu of the REM Manager’s duty to furnish independent reasoning.
The message emerging from the ruling is clear: where the ITA seeks to deviate from the value as reported by the parties to the transaction and which is supported by external and professional appraisal infrastructure, it must provide full and convincing reasoning. In the absence of such reasoning, and certainly when reliance is made on a source that is irrelevant or whose outcome is not binding, the assessor’s amendment may be disqualified.
As follow-up to the newsflash published by us back in February (for further details see our February newsletter), we wish to update you that the ITA has filed an appeal with the Supreme Court on the ruling rendered by the Appeals Committee for Real Estate Taxation in the case of Ashdar Building Company Ltd. (Ashdar), a member of the Ashtrom group, and represented by our firm, together with many project developing companies in the field.
As may be recalled, the Appeals Committee accepted Ashdar’s position and determined that the rights granted to developers within the framework of “Buyer’s Price” (Mehir LaMishtaken) tenders do not amount to a “land right”, as such term is defined in the Land Taxation Law and, therefore, are not subject to purchase tax. The Supreme Court will therefore be required to rule on the fundamental tax dispute. We will, of course, update you on all developments.
On 31 March 2026 the Temporary Order “Law for Encouraging Immigration (Aliyah) to Israel and Return to it” entered into effect, which is designed to encourage new immigrants to immigrate to Israel and the return to Israel of veteran returning residents, by granting a tax exemption on income generated from personal exertion in Israel.
The Temporary Order applies to individuals who became residents for Israeli tax purposes during the period between 5 November 2025 and 31 December 2026, and determines the annual exemption ceilings that are to apply throughout the 2026-2030 years. This is a benefit of exceptional scope, that has been added to the tax benefits currently enjoyed by new immigrants and veteran returning residents in relation to income derived by them outside Israel.
At the beginning of July, the ITA published Income Tax Circular 07/2026 (the Circular), broadly detailing the ITA’s stance regarding the manner of implementation of the Temporary Order, and includes important practical clarifications. The main provisions of the Circular are as follows:
– Manner for determining the date of immigration or return—the Circular clarifies that the central test with regard to the applicability of the eligibility for the tax benefits under the Temporary Order is the date of actual relocation of the “centre of life” to Israel, which would not necessarily coincide with the date on which the individual is issued with a new immigrant certificate (te’udat oleh) or returning resident certificate. In this context, it is also clarified that the election of an adjustment year does not postpone the date of entry of application of the Temporary Order.
– Profits from a transparent entity—the Circular emphasizes that the exemption under the Temporary Order applies only to “qualifying income” generated from personal exertion in Israel, such as income earned from a business, occupation or employment, while other income—including interest, dividends, rental and capital gains—is excluded from the benefit and will be taxed in Israel in accordance with the regular legal norms. It was thus clarified that, in order to prevent the diversion of profits to an individual beneficiary by means of a distribution of rights in the transparent entity, profits attributable to an individual from a “transparent entity”, such as a partnership, family company or a home company, will generally not be considered as “qualifying income” that would warrant eligibility for the tax benefits under the Temporary Order. Such restriction will nonetheless not apply where the individual holds a full stake in the transparent entity, since the concern of profit diversion will not arise, or where the individual is not a material shareholder in the transparent entity and thus cannot substantially influence its activity.
– Income from a relative—pursuant to the provisions of the Temporary Order, qualifying income received from a relative, warrants entitlement to only a limited tax benefit, up to an annual ceiling of NIS 140,000. In addition, an important exception was established whereby a company that is wholly-owned by the individual will not be deemed “a relative” for this purpose.
– Tax coordination and determination of advances during the year—as a rule, a full examination of the individual’s entitlement to tax benefits by virtue of the Temporary Order is done within the ambit of submission of his annual tax return. Nonetheless, in order to allow the individual to enjoy the benefit already during the year, the individual may submit to the ITA a preliminary request for tax coordination applicable to salaried workers, or seek a reduction in advances for the self-employed. It should be noted that entitlement to the benefit by applying for preliminary approval is limited to the low exemption ceilings when compared to the ceilings established in the Temporary Order and is also subject to compliance with certain procedural and evidentiary conditions, at the heart of which lies the test of days of stay in Israel during the years preceding the date of immigration or return to Israel.
– Retroactive cancellation of the exemption— the Temporary Order provides that an individual who enjoys the benefit, but ceased to be an Israeli resident during 2028 or 2029 and stayed in Israel for less than 75 days in either of those years, will retroactively forfeit the exemption granted to him by virtue of the Temporary Order. The Circular clarifies in this context that these constitute two cumulative conditions. Accordingly, in so far as this entails only a temporary exit from Israel without the individual having severed his Israeli residency status, the benefit will not be revoked retroactively, even if he stayed in Israel for less than 75 days.
* The newsflash is intended to provide subscribers with general information only and should not in any way be regarded as firm professional advice and/or a definitive legal opinion.
