Buying Israeli Property Through a Company as an American
Buying Israeli Property Through a Company as an American
Some American investors consider buying Israeli property through a company, whether an Israeli limited company, a US limited liability company or another entity. The motivations vary: separating investment assets, bringing in partners, managing several properties or planning succession. In Israel, a company that owns residential property is taxed differently from an individual, and purchase tax, income tax and capital gains rules may apply in ways that differ from personal ownership. In the United States, foreign entities can create complex reporting obligations. The structure should therefore be chosen only after careful advice from an Israeli tax advisor and a US CPA working together.
Why Investors Consider an Entity
An entity can make it easier to hold property with several partners, transfer interests without re-registering the property and keep investment activity separate from personal assets. For larger portfolios or commercial property, a company structure is common.
For a single residential apartment intended for family use, however, the benefits are often smaller than the added cost and complexity.
Estate planning is another motive. Some families hope that shares in an entity will be easier to pass on than real estate itself, yet inheritance of shares brings its own procedures, and the tax effects in both countries must be examined.
Israeli Tax Treatment in Qualitative Terms
Israeli tax law distinguishes between individuals and companies. Reliefs available to individuals for residential property, such as certain exemptions on sale, are generally not available to companies. Purchase tax may also be calculated differently.
Profits distributed from an Israeli company to shareholders may be taxed again as dividends. An Israeli tax advisor can model how these layers apply to your situation.
The US Side of the Picture
A US person who owns a foreign corporation may face detailed information returns and special anti-deferral rules. Failure to file can lead to significant penalties even when no tax is due.
A US LLC may be treated as a pass-through entity for US purposes, while Israel may treat it as a company. This mismatch can create double taxation or loss of credits if not planned properly.
Annual information returns for foreign entities
Classification of the entity in each country
Availability of foreign tax credits
Treatment of distributions and eventual sale
Registering a Foreign Company in Israel
A foreign company that holds Israeli real estate may need to register with the Israeli Registrar of Companies as a foreign company. Banks and the Land Registry will ask for certified and apostilled corporate documents, including resolutions authorizing the purchase and the signatories.
Keep these documents current, since changes in officers or ownership may require updated filings.
Financing and Practical Issues
Israeli banks generally offer residential mortgages to individuals. Lending to companies, particularly foreign ones, tends to follow commercial terms and may require personal guarantees.
Insurance, property tax registration and utility accounts will also be in the company's name, and the company will need a local address for notices.
When a Company Makes Sense
Entities are more often appropriate for commercial property, multi-unit investments, development projects or joint ventures with several investors. For these, the ability to raise financing and allocate profits among partners can outweigh the added complexity.
Whatever the choice, decide before signing. Transferring property from an individual to a company later is usually treated as a taxable event in Israel.
Ongoing costs should also be counted. Annual filings in both countries, bookkeeping, audits where required and professional fees can accumulate, and they continue for as long as the entity holds the property.
Frequently asked questions
Is it cheaper to buy through a company
Not necessarily. For residential property, personal ownership often enjoys reliefs that companies do not. The answer depends on your goals and requires professional modeling.
Can I use my existing US LLC
It is possible, but the Israeli and US treatment of the LLC may differ, with tax consequences. Consult an Israeli tax advisor and a US CPA before using it.
Does a company protect me from liability
A company can separate some liabilities, but lenders often require personal guarantees, and liability protection varies. Legal advice is needed for your circumstances.
Can I move the property into a company later
It can be done, but it is usually a taxable transfer in Israel and may create US consequences. Plan the structure at the outset.
Elkayam Group
Elkayam Group works on development, combination deals and complex transactions with backing companies and partners, drawing on three generations of experience and an heritage that goes back to the forties. Based at Rival Street 37 in Tel Aviv and working in Hebrew, English and French, our team helps American investors understand when an entity structure is worth discussing with their advisors.
Considering an entity for your Israeli investment. Talk with our team before you set up the structure.
+972-53-658-4252 · support@kobielkayamrealestateltd.com · Rival St 37, Tel Aviv
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