An apartment transfer on divorce in Israel is not treated as a sale for Israeli real estate tax purposes when the conditions of Section 4A of the Real Estate Taxation Law are met. The transfer therefore does not trigger land appreciation tax (Mas Shevach) or purchase tax at that stage. However, future tax consequences, the mortgage and registration of the transferred rights still need to be addressed. A court-approved divorce agreement provides the basis for the transfer, but does not complete it on its own.
This guide focuses on: implementing an apartment transfer as part of divorce, from the agreement and judgment through taxation, financing and registration. For a family gift, see transferring an apartment between relatives without consideration; for dealing with an existing loan and security, see selling a mortgaged apartment.
What is an apartment transfer on divorce?
As part of dividing their property, spouses may agree that one will receive all rights in an apartment, in exchange for a payment to the other spouse or as part of a wider allocation of assets.
Section 4A of the Real Estate Taxation Law applies to transfers of rights in real estate, or interests in a real estate association, made pursuant to a judgment issued in connection with divorce proceedings. Subject to its conditions, the provision may cover transfers between spouses and transfers from them to their children. It is not necessarily limited to the shared family home. Statutory text published by the Ministry of Justice (Hebrew).
The planned transfer must match the judgment and satisfy the statutory conditions. The fact that the parties are divorcing does not bring every transaction between them within this provision.
Land appreciation tax and purchase tax: now and later
Where Section 4A applies, the transfer is not treated as a sale and does not trigger land appreciation tax or purchase tax at the time of transfer. This is an exclusion from the definition of a sale, rather than simply a tax exemption for a sale transaction. Ministry of Justice explanation of Section 4A, 2026 (Hebrew).
The tax rules for gifts between relatives should not be applied automatically: a qualifying divorce transfer follows a different legal route.
Does a payment to the other spouse change the result?
An equalization payment does not necessarily prevent Section 4A from applying. The transfer must be examined in the context of the judgment issued in connection with the divorce proceedings and the approved arrangement.
The agreement should identify what is being transferred, to whom, in exchange for which obligations and on what timetable. Side arrangements that go beyond it require separate review.
What happens when the recipient later sells the apartment?
For the rights received on divorce, the acquisition date and acquisition value for tax purposes generally carry over from the transferring spouse. The value used in the spouses’ financial settlement does not automatically become a new acquisition value for land appreciation tax. Tax continuity under Amendment 55 to the law (Hebrew).
Future tax exposure should therefore be considered alongside the apartment’s value and outstanding mortgage. Estimated tax should not be deducted automatically: liability depends on the property’s history, the circumstances of the eventual sale and any applicable exemptions.
Is betterment levy payable on a divorce transfer?
Betterment levy (Hetel Hashbacha) and land appreciation tax are different charges and must be examined separately.
Amendment 146 to the Planning and Building Law, enacted in 2023, excluded certain transfers under a judgment providing for the transfer of real estate rights in connection with separation, between spouses or from them to their children, from the definition of a realization of rights. Where the statutory conditions are met, the transfer itself does not require payment of the levy at that stage. Official text of Amendment 146 (Hebrew).
This does not cancel a potential betterment levy liability. Liability may be determined upon a later realization of rights, such as a sale or the granting of a permit, in accordance with the law.
Before signing, the property’s planning position should be checked and responsibility for potential charges addressed. An agreement between the spouses does not, by itself, change who is legally liable to the authority.
What if the apartment has a mortgage?
Transferring ownership does not automatically release a borrower from the loan. Even if the divorce agreement requires one spouse to make all mortgage payments, releasing the other spouse from obligations to the bank requires a separate arrangement and the bank’s approval.
While negotiating the agreement, check:
- Whether the bank will approve keeping the loan in the recipient’s name alone.
- Whether additional financing is needed to pay the transferring spouse.
- Whether the loan must be refinanced or repaid, or its security changed.
- What will happen if financing or the borrower’s release is not approved on time.
Payment, transfer of rights and release from the debt must be coordinated. Otherwise, a person could transfer their share in the apartment while remaining liable to the bank.
What should the divorce agreement address?
A general clause stating that one spouse will receive the apartment can leave important issues unresolved. An agreement that can be implemented should address:
- Property identification: registration details, the share being transferred and registered appurtenances, such as parking or storage.
- The financial settlement: valuation, the outstanding mortgage and terms of any equalization payment.
- Financing: required approvals and the process for releasing the transferring spouse from the loan.
- Possession: the date of vacating or arrangements for continued residence, and interim payments.
- Documents and registration: signatures, powers of attorney, approvals and responsibility for completing the transfer.
- Delays: a mechanism for handling a bank refusal, missing documents or a registration obstacle.
If the apartment is rented out, rent, deposits and obligations to tenants should also be addressed.
How is the transfer registered in Israel?
First establish where the rights are recorded: the Land Registry (Tabu), the Israel Land Authority or a housing company. Requirements vary according to the nature of the rights and the property’s registration status.
The process generally includes:
- Obtaining a registry extract or confirmation of rights and checking mortgages, attachments and restrictions.
- Matching the agreement and judgment to the property details and rights being transferred.
- Meeting the bank’s requirements and obtaining the necessary approvals from the authorities and registering body.
- Preparing and submitting the transfer documents through the appropriate procedure.
- Obtaining an updated registry extract or confirmation of rights and verifying completion of the banking arrangements.
The judgment does not automatically update the property register. The process must be followed through to completion, including the related obligations under the agreement.
For example, where one spouse receives the apartment against an equalization payment, transferring the money alone is insufficient. Payment must be coordinated with the transfer documents, safeguards and mortgage arrangements.
Frequently asked questions about apartment transfers on divorce
Must the spouses wait until the religious divorce is finalized?
Not necessarily. Section 4A refers to a judgment issued in connection with divorce proceedings. The judicial decision and the transfer’s connection to those proceedings must be examined. A private agreement that has not received the necessary legal approval is insufficient on its own.
Can the apartment be transferred to the children?
The provision also covers transfers from the spouses to their children. Its conditions and the consequences of ownership for the children must be considered. Where a recipient is a minor, additional review of the required approvals and possible conflicts of interest is necessary.
Does the same rule apply to a sale to an outside buyer?
Not simply because the spouses are divorcing. A sale to a third party is assessed under the real estate tax rules applicable to that transaction, including any available exemptions. Dividing the proceeds between the spouses does not make it a transfer between them under Section 4A.
How long does registration take?
Timing depends on bank approvals, complete documentation and the property’s registration status. The agreement should set deadlines that account for these dependencies and provide a mechanism for handling delays.
Legal guidance for transferring an apartment on divorce
An apartment transfer on divorce requires coordination between the agreement, taxation, financing and registration. An early review can identify difficulties before the parties take on obligations that may be hard to fulfill.
Planning to transfer or receive rights in an apartment as part of divorce? Contact Asaf Arazi-Bitton Law Office to review the real estate and tax aspects of the transfer, in coordination with the handling of the family proceedings. Prepare a registry extract or confirmation of rights, a draft or approved agreement and current mortgage details for the consultation.
Disclaimer: The information in this article is provided for general informational purposes only and does not constitute legal advice, a legal opinion, or a substitute for individual advice from an attorney. Each case should be reviewed according to its specific circumstances, and it is recommended to consult an attorney before making any decision or taking action.
