Real estate

Real estate and capital gains tax

 

With regard to the Capital Gains Tax, which is due at the time of profit from a sale, transfer or exchange of assets - including real estate - the following rules apply:

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• Profit from the sale of a principal private residence is exempt from capital gains tax, provided that it is the sole and principal residence during the entire ownership period, or from March 31st 1982. A variety of rules allow disregarding periods of temporary absence in the main place of residence.

•  In the case of owning more than one property, one can select the principal private residence within two years of purchasing the second property. This is an important decision, because only the main residence sale profit is exempt from capital gains tax.

If the property served as a main residence for a period of time for capital gains tax, the last three years of the period are treated as the owner’s residence. This is beneficial for a married couple who intends to jointly own a property that is not exempt from capital gains tax, each of them will be entitled to an annual exemption.

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• If a property is partially used for business, interest on the relevant part of the loan for the purchase of such property can be counted as the company's expenditure. However, a percentage of Capital Gains Tax exemption is lost when the property is sold. On the other hand, if none of the  property’s rooms are used fully for business operations, the exemption from capital gains tax is preserved in its entirety

• A hectare (approx. 1.2 acres) of the terrain surrounding a property is also exempt from capital gains tax. A larger area can be exempt from tax if it is in line with the size and nature of the house. The exemption does not apply if the house is sold first, and the land at a later time