Tax Authority Steps Up Efforts to Combat Tax Evasion Among Landlords

By Aryeh Stern

Israel Tax Authority Director, Shay Aharonovich, is intensifying the fight against tax evasion within the real estate sector. The Authority is actively seeking lists from the Land Registry (Tabu) containing tens of thousands of property owners in Israel. This data will be cross-referenced with the Tax Authority’s own records to identify individuals who generate rental income but fail to declare it.

Previously, the Tax Authority lacked access to information regarding property inheritances or constructions on owned land, as these events did not necessitate mandatory reporting. Landlords who rented out such properties went unnoticed unless they voluntarily reported their income.

Now, the Land Registry is set to share this information with the Tax Authority, responsible for documenting all real estate transactions.

This effort coincides with the impending introduction of a new voluntary disclosure program, offering individuals the opportunity to reveal previously unreported income without facing criminal charges.

As per current Tax Authority data, 1.63 million Israelis own one property, while 290,000 and 86,000 own two and three or more properties, respectively. According to law, individuals renting out properties for more than NIS 5,654 monthly must report the income to the Tax Authority. Tax obligations can be fulfilled through a flat 10% rate on rental income or by incorporating it into overall income and paying taxes based on marginal rates, with potential deductions for expenses such as mortgage interest and repairs.

It’s speculated that the Tax Authority’s intensified focus on rental income stems from recent technological advancements, facilitating the analysis of large datasets and intricate cross-referencing.