Can I buy an Israeli apartment in my brother's name and have it treated as mine?

Buying in a relative's name is one of the oldest arrangements in Israeli property and one of the most expensive when it is done informally. Israeli tax law does recognise the arrangement, but only in a defined form and only on a short deadline. Section 74 of the Real Estate Taxation (Appreciation and Purchase) Law 5723-1963 requires anyone who acquires a right in real estate in his own name for another to notify the Director within 30 days of the acquisition that he bought it in trust, and to identify the beneficiary.

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Detailed Answer

The two sections work as a pair. Section 74 creates the notice, and Section 69 supplies the reward: the transfer of the right from the trustee to the beneficiary is exempt from tax, because economically nothing has moved. Section 69(b) defines the trustee as a person holding a right in his own name for another, and the beneficiary as the person for whom it is held. What the Israel Tax Authority tests is whether this was a genuine nominee arrangement from the outset. The beneficiary must be specific, existing and identified at the time of acquisition, which is why a notice naming "my children" or a beneficiary chosen a year later fails, and no exemption is given for a transfer to a beneficiary who was not named in the notice. The trustee must also have no economic interest of his own in the property, which is the point on which family arrangements most often collapse: a brother who contributed part of the price, lived in the flat, or took the rent is not a bare trustee whatever the paperwork says. Note also that Israeli law distinguishes this nominee holding from a substantive trust. The Supreme Court's Glis decision confirmed that vesting property in a trustee under a genuine trust, as opposed to a Section 69 nominee arrangement, is itself a taxable event, so importing a foreign family trust into an Israeli purchase is a different and far more expensive exercise.

For a buyer abroad the arrangement is usually attractive for the wrong reason, and it is worth saying plainly: buying through an Israeli relative does not obtain the resident purchase tax rates. Israeli purchase tax is charged by reference to the beneficiary, so a properly notified trust for a non-resident beneficiary attracts the additional-property rates that reach 8% and 10%, exactly as a direct purchase would. What the arrangement buys is convenience, and it buys it at real risk. If the notice is missed, the eventual transfer into your name is treated as a fresh sale, with purchase tax again at the non-resident rate and appreciation tax on any rise in value in between; on a NIS 3,000,000 flat that is comfortably over NIS 300,000 of avoidable tax. If your nominee dies, divorces or is sued before the transfer, the property is on the face of the register his, and an unregistered beneficiary abroad is an unsecured claimant in the resulting fight. The safer structure for most non-residents is to buy in your own name and manage the transaction remotely through a notarised and apostilled power of attorney, with the price held by your lawyer, an arrangement covered in our answer on using an Israeli lawyer's trust account as a foreign buyer.

In Practice: Section 74 of the Real Estate Taxation (Appreciation and Purchase) Law 5723-1963 requires the trust notice to reach the Israel Tax Authority within 30 days of acquisition, naming the specific beneficiary; Section 69 then exempts the transfer from trustee to beneficiary. Purchase tax is assessed by reference to the beneficiary, so a non-resident beneficiary pays the additional-property rates of 8% to 10%, roughly NIS 240,000 on a NIS 3,000,000 apartment, and a failed trust means paying that a second time on the transfer. Registration of the transfer in the Land Registry takes about 4 to 8 weeks once the tax clearances are issued.

When to Consult a Lawyer

• The purchase has already completed and no Section 74 notice was filed. There may still be a route through a late notice or a rectification application, but it is argued rather than granted, and the position worsens with every month.
• Your nominee contributed money to the purchase or has been receiving the rent. That defeats the bare trustee analysis, and the Tax Authority will treat the later transfer as a sale between two real owners.
• You are considering holding the Israeli property through a foreign family trust. Vesting property in a genuine trustee is a taxable event in Israel, which is a different rule from the Section 69 nominee exemption and produces a very different bill.

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Speak With an Israeli Attorney

We advise whether a nominee purchase serves any purpose in your case, file the Section 74 notice inside the 30 days where it does, and document the trust so that the eventual transfer into your name is exempt rather than taxed again.

Contact us for a confidential initial consultation.