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The temporary provision (Hora\u2019at Sha\u2019a<\/em>) adopted on December 31, 2024, as part of the Economic Efficiency Law (Hok HaHit\u2019ya\u2019alut HaKalkalit<\/em>) for the 2025 fiscal year introduces an exceptional tax mechanism for the transfer\u2014among other assets\u2014of real estate owned by closely held companies (Havrot Me\u2019atim<\/em>) to their shareholders. This article focuses primarily on real estate transfers, although other assets listed on the company\u2019s balance sheet may also be eligible, depending on the relevant section of the law (capital gains taxation).<\/p>\n The mechanism provides a triple tax exemption<\/strong>:<\/p>\n Exemption from real estate capital gains tax (Mas Shevach<\/em>)<\/strong> for the company, subject to conditions,<\/p>\n<\/li>\n Exemption from acquisition tax (Mas Rechisha<\/em>)<\/strong> for the shareholder receiving the asset, subject to conditions,<\/p>\n<\/li>\n Application of VAT at a zero rate (Ma\u2019am 0%<\/em>)<\/strong>, subject to conditions.<\/p>\n<\/li>\n<\/ul>\n Only the distribution of distributable profits (Revahim Reouim LeChaluka<\/em>) remains taxable as dividends.<\/p>\n It is essential to pay close attention to the following definitions:<\/p>\n The definition of distributable profit,<\/p>\n<\/li>\n The shareholder\u2019s proportional share of distributable profit.<\/p>\n<\/li>\n<\/ul>\n Failure to comply with either of these rules may invalidate the preferential regime and its associated tax benefits.<\/p>\n Distribution of distributable profits beginning with fiscal year 2025,<\/p>\n<\/li>\n All taxes must be fully settled.<\/p>\n<\/li>\n<\/ul>\n Eligible shareholders are only those holding more than 10% of the company\u2019s share capital (Ba\u2019al Menayot Me\u2019uti<\/em>),<\/p>\n<\/li>\n All taxes must be fully settled,<\/p>\n<\/li>\n The value taxable as a dividend on the date of transfer may, under certain conditions, be reduced by related loans.<\/p>\n<\/li>\n<\/ul>\n Capital gains tax applies to the individual shareholder at the following rates:<\/p>\n 47%<\/strong> on the portion of the gain attributable to the period during which the property was held by the company,<\/p>\n<\/li>\n Approximately 25%<\/strong>, subject to conditions, on the gain attributable to the shareholder\u2019s own period of ownership.<\/p>\n<\/li>\n<\/ul>\n<\/li>\n The exemption applicable to residential properties will not<\/strong> apply in this context.<\/p>\n<\/li>\n The sale will be subject to VAT if the company deducted VAT upon acquiring the asset.<\/p>\n<\/li>\n The sale will not<\/strong> be subject to acquisition tax (Mas Rechisha<\/em>).<\/p>\n<\/li>\n<\/ul>\n Companies owning residential properties that are personally used by their shareholders,<\/p>\n<\/li>\n Regularization of personal-use situations under Article 3(\u05d81),<\/p>\n<\/li>\n Optimization of residential real estate ownership structures.<\/p>\n<\/li>\n<\/ul>\n 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. This article is provided for informational purposes only. Each case must be analyzed individually. The information contained herein does not constitute legal advice.<\/em><\/p>\n\n\t\t
This measure is part of a broader reform concerning the taxation of undistributed profits (Masui Revahim Lo Mechulakim<\/em>).<\/p>\n
\nI. Transfer of the Property From the Company to the Shareholder<\/strong><\/h3>\n
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Two possible implementation methods:<\/strong><\/h4>\n
1. Transfer as part of a liquidation<\/strong><\/h4>\n
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2. Direct transfer without liquidation<\/strong><\/h4>\n
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\nII. Tax Regime Applicable to the Subsequent Sale of the Property by the Shareholder<\/strong><\/h3>\n
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\nIII. Conclusion<\/strong><\/h3>\n
1. A particularly important opportunity for residential real estate<\/strong><\/h4>\n
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2. Recommendations<\/strong><\/h4>\n
However, due to the complexity of the tax and legal implications\u2014as well as strict application deadlines\u2014professional guidance is essential to fully benefit from this temporary measure.<\/p>\n
\nDisclaimer<\/strong><\/h4>\n
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