What is a Business?

The Israeli Supreme Court has ruled that a meat trader who also carried out some real estate transactions was in business, resulting in a hefty extra VAT liability of NIS 825,000. This was a VAT case but it is fair to assume the taxpayer, an individual, may have also paid 50% income tax instead of 28% land appreciation tax on his real estate gains. Many businesses park their profits in properties, so, what was this taxpayer doing that was so businesslike? (Emile Levy vs. Petach Tikva Customs & VAT Office, Civil Appeal 1533/20 of January 2, 2023).

According to the judgment, the taxpayer was engaged in the business of importing and marketing meat and fish products. But he also engaged in real estate transactions. If they were private capital transactions, no VAT was applicable, if they were business transactions VAT was due according to the VAT Office. The Court found that in fact in the 25 years from 1988 to 2013, the taxpayer conducted over 30 transactions. There were 13 purchases, 16 sales, 2 combination deals and even 2 apartments received by way of gift. Some of the transactions were speculative in that purchases were made before re-zoning, and parceling up (splitting) land plots. Large amounts of money were involved. Land development was also involved. Some signs of a business were absent, for example there was apparently no business organization on the real estate side. Also the taxpayer didn’t claim input VAT on his real estate purchases. But the Court then applied the overriding test of the overall circumstances – the number of transactions, the types and diversity of the properties, the taxpayer’s undisputed knowledge of real estate, the profits made and the taxpayer’s use of a lawyer who specialized in real estate transactions. The Court said capital gains involve benefitting from an increase in market values whereas ordinary business income stems from exploiting skills and resources of the taxpayer. Therefore, the Supreme Court ruled the taxpayer was not only a meat trader but also in the real estate business.


Using a real estate lawyer is generally considered prudent. Being a property wheeler-dealer is something else.

Next Steps:

Please contact us to discuss any of the above matters further, or any other matter.

As always, consult experienced legal and tax advisors in each country at an early stage in specific cases.

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(c) Leon Harris 16.3.2023

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