Real Estate Trusts in Israel

Israel is known as a rising star in the real estate world, with steadily increasing property prices and soaring demand to match. This has made it an especially attractive option for many investors, and particularly for Americans, Brits, and others with Jewish heritage who find it convenient to own a second home in Israel.

Naturally, purchasing or investing in any overseas real estate brings with it a number of challenges and concerns regarding local legal and taxation frameworks. In Israel, one of these is the Real Estate Trust, or RET, under which real estate (usually an apartment) is purchased by or transferred to a designated trustee.

Using trusts to purchase or transfer real estate has a long history in this region, stretching back even before the formation of the modern State of Israel. In Ottoman times, RETs were often used to circumvent draconian property laws, but today they are a legitimate choice for such purposes as asset protection and commercial transactions.

Many investors opt to use these trusts to purchase or transfer apartments in Israel via a trustee. It is important to note that, although this trustee is registered as the property’s legal owner, Israeli tax laws consider the beneficiary to be the true owner. This distinction has been tested and clarified in a number of high-profile cases.

Another crucial related factor is, of course, taxation. By law, two main taxes are imposed on real estate sales in Israel: a purchase tax and a capital gains tax. However, real estate transferred as an inheritance is not regarded as a “sale” in Israel. Furthermore, there is no estate tax or equivalent under Israeli law, so the transfer of properties upon the demise of the owner is not subject to any tax at all.

These factors may make investing in Israeli real estate uniquely appealing, but of course all prospective investors are strongly urged to seek expert guidance on all such matters.

Contact the Copaz team today for a consultation.