Where the seller of shares is not a “dealer” (osek) and the purchaser is likewise not a “dealer”, as those terms are defined under the Israeli Value Added Tax (VAT) Law, the transaction is generally not subject to VAT, unless the purchaser is a non-profit organization (Malkar) or a financial institution.
Where the seller is not a dealer, but the purchaser is a dealer whose ordinary business includes the acquisition and sale of interests in real estate and/or real estate associations, the transaction will generally constitute an occasional transaction (Esek Akrai) for VAT purposes.
In such circumstances:
the transaction is subject to VAT;
the purchasing dealer is required to issue a self-invoice (self-billed tax invoice); and
in practice, the VAT liability is generally neutral because the purchaser is ordinarily entitled to deduct the corresponding input VAT based on that same invoice.
By contrast, where the purchasing dealer acquires the interest in the real estate association as a long-term investment, rather than in the ordinary course of its business, the acquisition is generally not subject to VAT, as it does not constitute either a business transaction or an occasional transaction for VAT purposes.
