The Tax Authority is gearing up for a new campaign aimed at reducing the extent of tax evasion in Israel's real estate sector. Recently, the Authority's director Shai Aharanovitz announced a new collaboration with the Land Registry (Tabo) that will allow for more efficient identification of landlords who do not report their income as required.

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Until now, the Tax Authority has struggled to track rental income from properties that did not undergo regular taxable events (such as purchase or sale). As a result, many Israelis who rented out inherited properties or those built on private land were able to partially or fully conceal their rental income.

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According to Aharanovitz: "There is a significant information gap that hinders enforcement in the real estate sector." However, the new collaboration with Tabo will provide the Authority with comprehensive data on real estate ownership across the country. This information will enable efficient detection of suspected cases of unreported rental income.

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In parallel, the Tax Authority is expected to soon announce a new voluntary disclosure procedure for a limited time. This procedure will allow taxpayers who have not fully reported their income to correct the situation while receiving immunity from prosecution (it should be noted that immunity will not be granted in every case).

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These initiatives are expected to have significant implications for law and tax collection:

• Substantial reduction in tax evasion from rental income.
• Increase in state tax revenues by hundreds of millions of shekels.
• Deterrence for potential landlords against future non-reporting.
• Raising awareness of the obligation to report rental income.

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Ultimately, the new initiatives aim to promote a proper, transparent and equitable real estate market in terms of tax burden distribution. Such a fair and compliant business environment is the foundation for public trust in the system and healthy economic growth.

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