The Finance Committee approved this morning (Thursday) a reduction in the capital gains tax rate to be paid by private landowners who put it up for sale.
The tax rate will be uniform and will be 251% of the transaction value, for land for which there is a building plan that permits construction on the land of at least 8 housing units and within specified time periods.
This is compared to the higher capital gains tax rates that currently exist.
The benefit was approved as a temporary provision for the years 2016-2018 within the framework of the Arrangements Law and was intended to encourage the release of private land, which is a large part of the land reserves for housing.
Finance Committee Chairman MK Moshe Gafni (United Torah Judaism) welcomed the move, although he noted that, like other individual programs, "the move must be part of an overall package of actions to reduce housing costs.".
Housing spokesperson in the Budget Division at the Ministry of Finance, Tzachi David: A large portion of the land for marketing for residential purposes is privately owned land, and therefore, as part of the effort to increase the supply of housing, it is right to encourage the sale of rights to land by individuals. The previous operation carried out on this subject in 2011 resulted in 70 transactions and over 1,400 housing units. This does not cause any significant damage or harm to state revenues. The current proposal will bring many more transactions due to the series of reliefs.
The benefit will apply to transactions from January 1, 2016 to December 31, 2018. The sale is of a right in real estate for which there is a building plan that permits the construction of at least 8 residential units. The determining period for receiving the benefit ranges from 42 to 48 months and the manner in which the benefit will be provided will be such that as construction progresses, the proportional rate of the benefit will be provided.
For example, on land sold for the construction of 10 buildings, upon completion of the first building, the seller will be entitled to 10% of the benefit and so on, instead of stipulating that receipt of the benefit will only begin upon completion of 80% of the project, as the Ministry of Finance requested to determine from the outset. The full benefit is available upon meeting the target within the aforementioned period.
This follows the demand of Committee Chairman Gafni, who said that "our interest is to provide the benefit and remove difficulties in obtaining it in order to encourage people to sell land." In the case of a construction plan of 1,000 apartments or more, the sale is to a contractor for engineering work and the land will constitute business inventory for that contractor. There is no restriction on the period of construction of 1,000 apartments or more for the purpose of receiving the benefit. The benefit also includes the sale of land purchased between April 1, 1961 and November 6, 2001, a period in which the capital gains tax rate was 43%. The benefit will also apply to combination transactions.
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