Parents often want to transfer residential property to their children during their lifetime — to reduce the estate, provide housing security, or optimise tax. However, a transfer is not tax-neutral. Several taxes and legal consequences must be considered before proceeding. (Shoshi Arbib Law Office.)
Why Parents Transfer Apartments to Children
Parents often want to transfer residential property to their children during their lifetime — to reduce the estate, provide housing security, or optimise tax. However, a transfer is not tax-neutral. Several taxes and legal consequences must be considered before proceeding.
Tax Implications of the Transfer
- Capital gains tax: A gift transfer to a child may be eligible for a specific gift exemption, but only if strict conditions are met. If the apartment has appreciated significantly, deferred capital gains liability passes to the child.
- Purchase tax: The child recipient pays purchase tax on a gift apartment — often at the reduced "gift" rate (one-third of standard), but only if the gift is to a qualifying close relative.
- Future sale by the child: The child's cost base for future capital gains calculation is the parent's original cost, not the gift value. This can create a large tax bill when the child eventually sells.
Protecting the Transferor
A parent who transfers their only apartment to a child without retaining any right (such as a usufruct or right of residence) may find themselves in a legally vulnerable position. Registering a right of residence at the Land Registry ensures the parent can continue living in the property regardless of what happens to the child's ownership.
Does a child pay purchase tax on an apartment received as a gift from a parent in Israel?
Yes — even a gift transfer triggers purchase tax. However, transfers to close relatives (children, spouses, siblings, parents) may qualify for a reduced purchase tax rate of one-third of the standard rate. The exact amount depends on the property value and the child's own ownership status. A transfer to a child who already owns another apartment will result in higher purchase tax rates.
What is protecting the transferor?
A parent who transfers their only apartment to a child without retaining any right (such as a usufruct or right of residence) may find themselves in a legally vulnerable position. Registering a right of residence at the Land Registry ensures the parent can continue living in the property regardless of what happens to the child's ownership.
Official References: Israel Tax Authority — Real Estate Tax · Israel Land Authority · Israel Ministry of Justice · Israeli Courts Administration · National Insurance Institute of Israel
Key Steps in Handling Israeli Real Estate Tax
- Gather documentation — Original purchase deed, receipts for deductible expenses (renovation, attorney, realtor), and CPI adjustment certificates from the Tax Authority.
- Calculate real capital gains — Subtract the CPI-adjusted acquisition cost and recognised expenses from the sale price to determine the taxable gain.
- Check exemption eligibility — Verify that the property qualifies as a "residential dwelling" under Section 49b of the Real Estate Taxation Law, and that no similar exemption was used in the prior 18 months.
- File self-assessment on time — Submit the self-assessment declaration within 30 days of signing the sale contract, after obtaining professional tax advice.
Shoshi Arbib Law Office — Attorney | CPA | Mediator, Netanya, Israel.
