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Exemptions From Paying Arnona – A Comprehensive Legal Guide

Michael Decker
Michael Decker

This article discusses two prominent types of exemptions from paying arnona (Israeli property taxes): exemptions for property that stands empty and exemptions for property that is unfit for use. The differences between these two types and the legal conditions for receiving them are explained below.

Our law firm in Jerusalem and Tel Aviv specializes in real estate law and arnona. Our firm assists its clients in dealing with local authorities when applying for discounts or exemptions from arnona, and it represents them before the courts in objection and appeal proceedings related to arnona.

Arnona and the Various Types of Exemptions

Arnona exemptions

To fund services and activities offered by local municipalities, the municipalities collect arnona from residents and business owners annually (with an option for monthly or bi-monthly payments extended by most local authorities). Arnona rates vary between municipalities, and are determined by the type of property and its size. Nonetheless, the provisions dealing with exemptions from arnona are the same for all municipalities. There are several types of exemptions. One type is exemptions for certain institutions (such as synagogues). Another type, which is discussed below, is exemptions granted due to the condition of the property.

Exemptions for Empty Property

This exemption is granted on a one-time basis and for a limited period. The State Economy Arrangements Law (Arnona Discount) from 1993 actually defines it as a 100% discount (and, therefore, it may be considered as a sort of exemption). The law distinguishes between new and non-new property. For new property, a 100% discount is granted for a period of one year from the date when the property is built and ready to use, as long as it stands empty.

For non-new property that stands empty, a varying discount is granted over a period of three years. A 100% discount is granted for the first six months. After the first six months, a discount of up to 66.66% is granted for another six months. A discount of up to 50% is then granted for two more years. The property must be empty and stand unused for at least 30 consecutive days. The municipality decides whether to grant the exemption, and proof that the property is empty must be provided.

Exemptions for Property That is Unfit for Use

The Municipal Corporations Ordinance grants an exemption from arnona for a building (or part of it) that has been destroyed or damaged to a degree that makes it unfit for use. The exemption is initially granted for three years, after which payment is set at a reduced amount, according to the type of property, for five years. Thereafter, if the property remains in the same condition, written notice is given and no further payments are required.

In practice, local municipalities do not often grant this exemption, since granting it freely may encourage property neglect. Therefore, proof of the following conditions is required: (1) the structure was destroyed or damaged to the extent that it is no longer fit for use; (2) no one physically resides in the building; (3) notice concerning this has been given. The determining date for the purpose of granting the exemption is the date when the municipality was notified of the condition of the property.

Various tests have emerged in the case law to help determine if the property is unfit for use. The main test is objective, and it tests whether or not the property is objectively unfit for use. Alongside this test, there is an economic test, which examines the economic viability of making the property fit for use. This test has been widely criticized, since it constitutes a requirement to invest money in renovating the property, a requirement that is not based on any explicit law. There is also an engineering test, which examines the danger posed by using the building in its current condition.

Proof that the property is unfit for use is gained through evidence, such as opinions from experts who have inspected the property. The courts have repeatedly emphasized that, when a municipality claims on its part that there is no base for granting the exemption, it must bring evidence of its own that contradicts the property owner’s evidence. General claims about the property being inspected and found fit for use are not enough.

Contact a Lawyer Specializing in Real Estate and Arnona

This article presents the main exemptions from paying arnona for empty property and property that is unfit for use. In many cases, receiving these exemptions involves dealing with much bureaucracy and even undergoing a court trial or administrative trial. If you have questions about this complex issue or are in need of legal assistance in handling arnona exemption applications for property that is empty or unfit for use, we will be happy to assist you. Our law firm has extensive professional experience and expertise in real estate and arnona law. You can contact us using the phone numbers or email address listed below.

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