Real Estate in Israel: A Unique Tax Opportunity for Transfers Between a Company and Its Shareholder in 2025

Posted by on Dec 11, 2025 in Blog, Fiscalité immobilière

The temporary provision (Hora’at Sha’a) adopted on December 31, 2024, as part of the Economic Efficiency Law (Hok HaHit’ya’alut HaKalkalit) for the 2025 fiscal year introduces an exceptional tax mechanism for the transfer—among other assets—of real estate owned by closely held companies (Havrot Me’atim) to their shareholders.
This measure is part of a broader reform concerning the taxation of undistributed profits (Masui Revahim Lo Mechulakim).

This article focuses primarily on real estate transfers, although other assets listed on the company’s balance sheet may also be eligible, depending on the relevant section of the law (capital gains taxation).

I. Transfer of the Property From the Company to the Shareholder

The mechanism provides a triple tax exemption:

  • Exemption from real estate capital gains tax (Mas Shevach) for the company, subject to conditions,

  • Exemption from acquisition tax (Mas Rechisha) for the shareholder receiving the asset, subject to conditions,

  • Application of VAT at a zero rate (Ma’am 0%), subject to conditions.

Only the distribution of distributable profits (Revahim Reouim LeChaluka) remains taxable as dividends.

It is essential to pay close attention to the following definitions:

  • The definition of distributable profit,

  • The shareholder’s proportional share of distributable profit.

Failure to comply with either of these rules may invalidate the preferential regime and its associated tax benefits.

Two possible implementation methods:

1. Transfer as part of a liquidation

  • Distribution of distributable profits beginning with fiscal year 2025,

  • All taxes must be fully settled.

2. Direct transfer without liquidation

  • Eligible shareholders are only those holding more than 10% of the company’s share capital (Ba’al Menayot Me’uti),

  • All taxes must be fully settled,

  • The value taxable as a dividend on the date of transfer may, under certain conditions, be reduced by related loans.

II. Tax Regime Applicable to the Subsequent Sale of the Property by the Shareholder

  • Capital gains tax applies to the individual shareholder at the following rates:

    • 47% on the portion of the gain attributable to the period during which the property was held by the company,

    • Approximately 25%, subject to conditions, on the gain attributable to the shareholder’s own period of ownership.

  • The exemption applicable to residential properties will not apply in this context.

  • The sale will be subject to VAT if the company deducted VAT upon acquiring the asset.

  • The sale will not be subject to acquisition tax (Mas Rechisha).

III. Conclusion

1. A particularly important opportunity for residential real estate

  • Companies owning residential properties that are personally used by their shareholders,

  • Regularization of personal-use situations under Article 3(ט1),

  • Optimization of residential real estate ownership structures.

2. Recommendations

The year 2025 is set to be a pivotal period for the asset restructuring of Israeli companies. The exceptional flexibility of this provision, combined with its significant tax advantages, makes it a major strategic tool for businesses of any size and sector.
However, due to the complexity of the tax and legal implications—as well as strict application deadlines—professional guidance is essential to fully benefit from this temporary measure.

Disclaimer

This article is provided for informational purposes only. Each case must be analyzed individually. The information contained herein does not constitute legal advice.

Our Law Firm, enhanced by its French and Israeli lawyers and tax advisors, has set itself the mission of ensuring high-level support through our dual expertise and presence in France and Israel, and remains at your disposal to implement solutions best adapted to your specific needs.