Caesarea Homebuyers Face Hefty Tax Bill Over Construction Commitments
A Tel Aviv District Court judge ruled that buyers of a semi-detached house in Caesarea must pay full purchase tax, rejecting their claim for a lower rate because the purchase included a binding commitment to complete construction.
Two families will pay full purchase tax on a semi-detached house in Caesarea bought during construction, as the seller was contractually bound to complete the project, ruled Tel Aviv District Court Judge Harel Kirsch. While the buyers argued they should pay 5% of the transaction value (650,000 NIS), the Tax Authority's position—adopted by Kirsch—sets the tax at 1.08 million NIS, resulting in a difference of 430,000 NIS.
David and Einat Sharvit, along with Avraham and Sarit Sharvit, purchased the property on Hateena Street in Caesarea from Yuval Aharon and Roni Biton. The latter had acquired the previous building in 2021 and a year later signed agreements with construction companies owned by their fathers to demolish the old house and build a new one for 4 million NIS. That same year, they sold the plot to the Sharvit brothers, who stepped into their shoes in the agreements with the construction companies, committing to pay 2 million NIS per family.
Legal Definitions and Court Rationale
For purchase tax purposes, a residential apartment is defined as one that is used or intended to be used as a dwelling, including incomplete apartments except those sold without a commitment from the seller to finish construction. Kirsch noted that a skeleton structure does not qualify as a residential apartment, whereas off-plan purchases from a contractor do qualify because the contractor promises completion.
The nature of the transaction was the acquisition of apartments at an advanced stage of construction, rather than entering into an 'adventure' of self-building on a purchased plot, Judge Harel Kirsch ruled.
Kirsch outlined several key factors supporting this decision:
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The buyers stepped into the sellers' shoes regarding the construction contracts.
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The construction was already at a fairly advanced stage.
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There was a close and binding link between the land sale and the construction.
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The familial relationship between the sellers and the contractors carried significant weight.
Ruling Conclusion
Tax committee members Zvi Friedman and Micha Lazar concurred with Kirsch's ruling. The Sharvit families were represented by attorneys Hananel Barhoum and Mordechai Cohen, while the Real Estate Taxation Directorate was represented by attorney David Ohana.
