When will the sale of an apartment during a clearance-construction project become a tax accident in the improvement tax?

In the event of selling an apartment that included in a project after the planning committees have approved a plan for the project. At this time, an improvement tax event takes place and from this date onwards until the building permit is issued, an apartment owner who sells his apartment will bear the entire improvement tax alone instead of the developer who usually undertakes in an agreement with the tenants to bear all taxes, including the improvement tax. So how does this still happen? According to the law, an improvement tax event occurs as a result of a planning action that improves the property, for example, approval of a plan that adds building rights, for example to build additional floors, rooms on the roof, or expand an apartment. The improvement is formed after approval of one of the three planning actions stipulated in the law (approval - plan, relief or permitting an abnormal use). The tax is paid when a realization event occurs, with the most common being a sale event or approval of a building permit. Thus, in a Pinu Binui project, after the project plan is approved, the value of the apartment increases significantly (for example, the plan approves the construction of a new building in which the apartments are larger). At this stage, the path has accelerated for apartment owners who want to capture the profit and without noticing, they sign a sale agreement, an event that requires payment of the improvement tax. Then comes the local committee's demand for payment of tax potentially amounting to hundreds of thousands of shekels. It is important to note that, for most, a Pinu Binui agreement does not cover a situation of early sale, and therefore, from the moment the plan is approved, one must wait until the building permit is issued, an event that involves payment of the improvement tax by the developer.

Recently, a court rejected a claim by an apartment owner to require a developer to pay an improvement tax in an early sale, and ruled that the apartment owner was required to wait for the suspensive conditions to be met and for the developer to pay the tax.

Before selling the apartment, contact the attorney representing you and even contact the developer to clarify the tax implications arising from the sale event.

(Tel Aviv) 70675-01-24 Giora Tzur Tana v. P.B. Construction Eviction Company Ltd., published in Nevo 14.9.2025