Background
The source of this tax is the third annex of the construction law of 1965. This levy is due to municipalities where the asset’s location is under their jurisdiction. Practically the due date of paying this tax is when rights of the asset are transferred to a new owner or in cases of liquidity or additional construction permits that are verified by the local authority when residents request additional construction permits for their asset
Municipalities are interested to collect more taxes and therefore wish to license more construction permits but are sometimes restricted by safety, transportation issues, crowding and objections that are submitted by nearby or adjacent neighbors
Occasionally municipalities issue permits even without any specific requests by residents because they have the opportunity to do so for charging more taxes in the future and generally for improving standards of living for their residents
The tax rate is 50% out of the difference between current asset’s worth and the worth of when it was bought and due to construction permits issued in the aforesaid period. It is usually recommended to find out what additional rights were issued commencing the purchase date till the selling of the asset, since the seller is usually the payer
Defer of reclamation tax charges
The law’s propagative is to charge this tax at the issuance date of the construction permits, but municipalities prefer to defer this charge to the date when the asset is sold. Usually not all owners are aware to it but buyers have to check this out, unless other arrangements considering the buyer are made. The levy charge is due within 90 days from the permits issuance date and the owners can appeal against it within 45 days or 12 months in a case that the entire area goes under additional construction permits that still need to be relatively allocated
Cases of exemptions
An area that is considered as rehabilitative area under municipal and governmental regulations
Special exemption issued by the interior and construction bureaus for certain areas that need financial and social encouragement
Reclamation of educational, cultural and similar institutions that operate without profit purposes and/or operate only for the public welfare
Expansion of accommodation area up to a specific limit for expanding residential areas
whereas exceeding it, will entail reclamation tax charges
Additional service area up to 5% for facilities such as lifts, storage etc., are also exempt
Public ways and roads that are paved and handled by local or governmental authorities
Buildings foundations strengthening and additional residential area, under regulation 38 up to a specific area limit, whereas above it reclamation tax is due
Conclusion
Every buyer and seller of assets need to check all aspects of this reclamation tax. It is well recommended that these aspects will be thoroughly checked before any transactions are made in order to evade uncertainty and confusion
