Real Estate Trust in Israel

By Alon Kaplan, Managing Partner of Alon Kaplan Law Firm and Chairman of MMG Kaplex Trust Company (1978) Ltd., members of the International Network of the Morgan & Morgan Group

Many investors who buy real estate in Israel wish to maintain their privacy.

Real estate is registered in a public registrar –the “Tabu” – which is open for public review and accessible through the Internet.  There are many reasons for keeping the information of the registration confidential; some people do it for family reasons, asset protection, issues of marriage and divorce and many other reasons.

The way to achieve confidentiality is to have the property registered in a Real Estate Trust (RET).  The RET is a trust arrangement by which a trustee holds the property in trust for the owner of the property.  Israeli law provides the legal arrangement for such a structure.  The two governing laws are the Law of Trusts (1979) –“Trust law” and the Real Estate Tax Law (1963) – “Tax law”.  Israeli law ruled that the RET is a special kind of trust which is in fact an inter vivos trust, i.e. valid for the lifetime of the owner (“the settlor”). Note: the “formal” ownership is registered under the name of the trustee instead of the settlor.

The law provides an arrangement by which the property is registered in the name of a company which acts as the trustee of the settlor and keeps the property in trust for him.

The company is transparent to the tax authorities and any tax benefits or liabilities are those of the settlor.


Under the Tax law, any transfers either from the owner/settlor to the trustee (in trust for the owner/settlor), or from the trustee to the owner /settlor is tax free.  The rationale is that the economic ownership is kept with the settlor and there is no “real” transfer of ownership.

It is important to note that the information submitted to the tax authorities under this procedure is kept strictly confidential by the tax authority and cannot be divulged without a court order.

In order to avoid any abuse of this procedure (artificial transaction) the law stipulates a requirement to provide proof that the funds for the purchase of the property were the funds of the settlor, and the purchase was made by instructions of the settlor.

In addition, the trustee must declare that he has no beneficial ownership in the property or the income which is generated from the property.  This income is considered the income of the settlor.

It is a requirement to have a trust agreement between the settlor and the trustee executed before the purchase date of the real estate.

Once the trust has passed the above mentioned fundamental test it must pass the formal requirements of reporting. The Tax law requires that any transfer of a property to the trustee acting for the settlor must be reported within 30 days of the transaction to the tax authorities in a simple reporting procedure.

Tax benefits

There are a number of tax benefits for the settlor in such a legal arrangement:

  • Leasing a residential property under the amount of $1500 per month is tax free for an individual.  Since the settlor is such a person, the exemption applies even if the property is registered in the name of the company.
  • The sale of the property is considered a sale by an individual and therefore any tax exemption/benefit granted to an individual will apply to such a sale. As of 2014 some changes are expected regarding sale of real estate by non residents of Israel.

Termination of the RET

The trust will terminate in any one of the following events:

  • Change of trustee and establishment of a new trust relationship.

In such a case the transfer of the property from the present trustee to the new trustee will not be considered a taxable event.

  • Sale of the property.

The trustee will sell the property in the name of the settlor and taxation will be made under the regime of an individual (and not a company) selling the property.

  • Death of the settlor.

In the event of the demise of the settlor the Israeli Succession Law (1965) will apply.  If the settlor had executed a Will, the provision of the Will will apply and the property will be registered in the names of the beneficiaries of the will.

  • If there is no will, then certain provisions of the Succession Law will apply to the beneficiaries for interstate deceased persons.
  • In both cases there will be no estate tax on the transfer of title to the beneficiaries.
  • If the beneficiaries wish to continue the trust arrangement, they may do so and appoint the existing trustee or another trustee under a trust agreement.


The real estate trust arrangement in Israel is strictly regulated and serves as an efficient legal and tax structure for individuals who wish to purchase and invest in real estate in Israel with tax and confidential benefits.

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