Finance Ministry Broadens VAT Exemption

YERUSHALAYIM (Hamodia Staff) -

The Ministry of Finance on Tuesday raised the eligibility threshold for the zero VAT plan for those who have not served in the IDF or National Service to buy a first home from NIS 600,000 to NIS 950,000, Globes reports.

The change in the draft bill comes after scathing criticism of its discriminatory nature, which sought to exclude chareidim and Israeli Arabs from the benefit. As was widely noted when the proposal was made, new NIS 600,000 apartments available from contractors are in such short supply that it made the provision virtually a fiction. As it stands, the latest revision is still blatantly discriminatory. Originally, Finance Minister Yair Lapid wanted to exclude non-military veterans from the exemption altogether.

In another change, the Ministry of Finance will not issue eligibility documents. Instead, responses by the homebuyers to several questions that will be published online will suffice. The questions in the declaration will concern home ownership, past holdings in a home, and other eligibility criteria, and relevant IDF or National Service discharge documents will be requested.

The applicant will submit the documents to the contractor when buying the home, and the contractor will append them to the sale documents sent to the Tax Authority. The Tax Authority will examine the homebuyer’s declaration and determine if he is eligible for the zero VAT plan when it approves the sale.

Ministry of Finance officials say that this mechanism will simplify the process of checking eligibility, which was at first planned to be an entirely separate procedure.

Although the change may shorten the time to exercise the tax break, Globes notes that it could result in serious problems of a different kind. In effect, eligibility for the tax break is approved retroactively, after the home is bought. If the application is denied, the homebuyer will have to pay the full price.