Realtors' capital to be cut by NIS 2.5B
Concentration Committee's recommendations may raise corporate taxes by 25%, likely to hit real estate firms the hardest. Most companies already note effect in their third quarter reports
The inquiry reviewed the third quarter reports posted by public real estate firms in Israel, in which one-time payments were recorded following the tax hike, after the Knesset approved the Concentration Committee's recommendation to put a stopper on the corporate tax decrease scheme.
The review shows that the highest one-time tax cost was recorded by David Azrieli's Azrieli Group, with over NIS 500 million (about $135 million) expected to pour into the government coffers, followed by Leora Ofer's Melisron with a NIS 385 million ($105 million) loss and Nochi Dankner's PBC Group with a NIS 180 million ($50 million) loss.
The government's takings will grow even more, probably by hundreds of thousands of shekels. Several leading real estate firms have noted in their reports that at this stage they cannot asses the affects of the tax hike.
The current shockwave follows the adjustment companies made in their 2009 reports following the corporate tax cut at the time which was introduced as part of the economic streamlining act which stipulated that the tax will gradually drop from 26% to 18% during 2009-2016. Now that the situation is reversed, profits are turning into losses.
Attorney Yaniv Shekel from the Shekel & Co. law firm, which specializes in tax laws, explains: "In effect, the change means that more money will go into the government's coffers. Evaluations by real estate firms were higher than in the past since they forecasted profits from the sale of property that has a lower tax rate.
"In retrospect, they realized that the tax neither rose nor dropped. The government will see the money in 2012 onwards. These are essentially additional funds the government would have not collected without the tax cut."
Shekel adds, "The money will be collected upon the sale of property or the intake of yield on the property such as rent. It will be distributed throughout the next few years. It should be noted that these sums will not hurt the companies. It reflects the fact that companies will pay regular taxes on their profits whereas until now, they recorded tax benefits following the tax cut which has now been rescinded."
Among the companies which will likely not be severely affected by the tax hike are industrial and high- tech companies which, as ensured by the law to encourage capital investments, pay lower tax rates that will not be affected by the changes.
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