For immigrants who arrive as part of a “Group Aliya Flight,” a flight that takes place every six months or a year, something as small as a delayed flight can cause them to lose between tens of thousands and hundreds of thousands of shekels. All due to land taxation regulations that are not suitable for modern times.

The Real Estate Taxation regulation, which was legislated in 1974, is unsuited to modern immigration to Israel, and causes many immigrants to lose their entitlement to a tax benefit of up to hundreds of thousands of shekels.

The Land Taxation, Appreciation and Acquisition Regulation gives new immigrants a significant tax benefit when purchasing an apartment or a business. A new immigrant who purchases an apartment or business valued at NIS 1.76 million is required to pay purchase tax of only 0.5%. For an apartment or business whose value exceeds NIS 1.76 million, the immigrant will be required to pay only 5% (as per tax year 2017).

The tax benefit’s value ranges from tens of thousands of shekels to over one hundred thousand shekels. However, there is a catch: the wording of Regulation 12 for immigrants establishes a framework of time during which the immigrant can enjoy this benefit. The immigrant must purchase the property between one year prior to immigration to Israel and up to seven years thereafter. If the immigrant serves in the army or does national service – his or her period of service is not counted against the time limit.

A Soft Landing

Here the trouble begins: Regulation 12 for immigrants was formulated many years ago, in years when many of the new immigrants were people in their twenties. Most of them immigrated to Israel without family and children and also without property they would have accumulated during many years of work. People in this age group would immigrate to Israel, and only after a period of time buy an apartment or business.

Today, even in the wake of the terrorist attacks in Paris, Nice, London, and Barcelona, and because of the rise of anti-Semitism in many European countries and the United States, many immigrants now have a different profile. These are families and fewer young bachelors. These are people who had employment and were financially established, many of whom were business owners, who are now cut off from their whole lives, having to sell their homes and businesses before coming to Israel with a large amount of wealth. They usually leave nothing behind in their country of origin.

Such people plan their immigration a long time in advance. They usually purchase an apartment or business in Israel before moving to Israel, in order to ensure for themselves of a “soft landing,” which helps them in the absorption process. They actually begin their lives in Israel from a more convenient point. This phenomenon is particularly evident among immigrants from France, but also among immigrants from the United States and other countries.

It should be noted that Jewish Agency employees and other organizations working in various countries and helping Jews with their immigration to Israel are encouraging Jews to purchase apartments and businesses before immigration. In many cases they even tell immigrants that they are entitled to a tax benefit when purchasing their assets.

Group Aliya Flights

Today, immigration from many countries is done in a way known as “Group Aliya Flights.” The Agency organizes a flight for immigrants, during which they arrange all the documents related to immigration to Israel on the flight itself. This makes it very easy for the immigrants, as it prevents the necessity dealing with all the bureaucracy involved in immigrating to Israel after arrival. Many immigrants, therefore, prefer to immigrate as part of a group flight immigration process rather than independently on regular flights.

The Agency operates a limited number of such flights annually. In France, for example, there are only two flights a year. And here arises the aforementioned problem: it often happens that immigrants were supposed to board a flight on a specific date, but due to various constraints their flight is delayed. The postponement causes delays of several months and even half a year. This has heavy economic implications.

Thus, for example, it emerges that an immigrant acquired a business and was supposed to immigrate to Israel eight months later, however, his flight (the “group flight”) was postponed by six months, causing him to lose his tax benefit entitlement. He is now responsible for paying a 6% for the business he purchased. If the immigrant purchased a business worth NIS 1 million, instead of paying a tax of NIS 5,000, he will be required to pay NIS 50,000. This loss only grows as the value of the acquired business increases.

The problem also exists in purchasing an apartment. For a person who purchases a first apartment and does not have another apartment in Israel is not harmed in most cases. However, if he already held an apartment in Israel and is now purchasing a second apartment or over a third of an apartment (or over half in case of an inheritance) in preparation for immigration, he is liable to lose more than NIS 100,000 if his flight is delayed for any reason.

For a second apartment worth up to NIS 5 million, he will be required to pay 8% tax; more expensive apartments incur a 10% tax. This is a tax increase that ranges from tens to hundreds of thousands of shekels. And as esoteric as it sounds, this is relevant for many immigrants.

Apartments in Case of Emergency

Among the many Jews in the world who have experienced waves of anti-Semitism in the past and continue to experience it today, the practice over the years has been to buy an apartment in Israel. They see this apartment as an “apartment for a rainy day,” an in-case-of-emergency apartment in the event that anti-Semitism leaves them no choice but to immigrate to Israel on short notice. This practice is common among French Jews, but also among Jews from certain parts of the United States and Europe.

Sometimes these are apartments that were purchased years ago and are rented out. In many cases, in the time since the purchase of the apartment the needs of the potential immigrant have changed and the apartment is no longer suitable for them. For example, the family is growing and in anticipation of immigrating they need a larger dwelling, or the immigrant has an apartment in Netanya but has found employment in Jerusalem. For these and many other reasons, many immigrants acquire additional apartments near their estimated time of immigration, only this time it is an apartment suitable for their existing family and employment situation.

A new immigrant who bought a second apartment worth NIS 2 million and lost his entitlement to a tax benefit loses a benefit of NIS 140,000. If he purchased a second apartment worth NIS 2.5 million, he will lose a tax benefit of about NIS 155 thousand. The loss continues to increase with the increasing value of the purchased apartment.

In my opinion, this is an injustice to immigrants. These immigrants are not to blame for the fact that the flight organized by the Jewish Agency was delayed. In addition, most immigrants are not informed of the law’s fine print: no one will tell them that if they come to Israel more than a year after they have bought a business or an apartment, they will lose their tax benefit.

Kahlon, This is For You to Remedy

The Jewish Agency encourages immigrants to purchase an apartment and find employment before immigration. Agency officials tell immigrants that they deserve a tax benefit and that it’s best to purchase their property in advance so they will have a home without paying rent or have a business to immediately begin working and earning a living when they land.

Therefore, when the flight is delayed by several months, the immigrants do not even know that it is better for them to give up the next “Group Aliya Flight.” They do not think for a moment that it’s better for them to instead get on a regular flight and deal with the money and paperwork themselves.