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.
