Real Estate Tax Refund Denied Over Strict 24-Month Deadline in Raanana
An appeals committee ruled that a 24-month deadline for a purchase tax refund on real estate projects is a strict substantive threshold condition with no room for extensions.
A recent ruling by the appeals committee has clarified the strict boundaries of a tax benefit granting a refund of one-sixth of the purchase tax paid by contracting companies. The benefit, under regulation 2(1a) of the Real Estate Taxation Regulations, is conditional upon obtaining a permit for the construction of at least one residential apartment no later than 24 months from the date of sale, with zero flexibility regarding the deadline.
The Background of the Dispute
In June 2020, Briga acquired land rights in southern Raanana to develop a project of approximately 150 residential units across two separate agreements, paying a full purchase tax rate of 6% amounting to about 6.3 million shekels for both transactions. The company subsequently requested a refund of one-sixth of the purchase tax, totaling approximately 1.06 million shekels.
Although the company submitted a permit application as early as June 2021, the full building permit was only obtained in December 2022, exceeding the 24-month window. The delay occurred because the company's request for a separate shoring and excavation permit was rejected at the time by the Raanana municipality due to a policy against splitting permits, while a conditional approval from the planning committee was only granted in March 2022.
The real estate taxation manager rejected the correction and refund request because more than 24 months had elapsed, ruling that there is no statutory authority to extend the deadline.
Arguments of the Parties and Ruling
The company argued that it fulfilled the purpose of the relief and advanced the project without delay, attributing the setback to municipal policy. Furthermore, the company revealed that the tax authority maintained a hidden position regarding excavation permits. However, Judge Avi Gorman, chairman of the appeals committee, dismissed the appeal in full and ordered the company to pay 10,000 shekels in costs. The court established that no official permit was received within the stipulated period, and conditional approval does not constitute a building permit.
The 24-month period is a substantive threshold condition for obtaining the tax benefit rather than a procedural deadline, and the tax manager lacks any authority to extend it.
Despite dismissing the appeal, the judge harshly criticized the tax authority's conduct for failing to publicly disclose its internal legal positions in a timely manner. Nevertheless, the court emphasized that administrative shortcomings do not grant taxpayers entitlement to tax benefits they failed to legally qualify for.
