Globes, Adv. Orit Koch, 30.08.2020

Background: Taxation of purchasing groups has employed the tax authority since the groups were born. After the legislation was amended in 2011 and the tax paid by the members of the group was compared to the tax paid by the purchaser of an apartment from a contractor, the last significant tax difference between organizing in a purchasing group and buying an apartment from a contractor is the additional purchase tax paid by a contractor End purchasers purchase the land directly from the owner.

The most effective tool for organizing purchasing groups is the "unique option" device: the organizer purchases an option from the landowner for a certain period, thus ensuring that the landlord "does not run away" during the period when the organizer is forming the group of buyers. Once the organizer finishes locating all the purchasers he passes the option on to the group members, who exercise it and purchase the land directly from the landowner.

For years this outline was recognized by the tax authority as legitimate - the organizer Musa as the purchaser of a "unique option" (and was exempt from purchase tax) and at the time of exercising the option the landowner was considered the land seller directly to the group members, who paid the purchase tax on the land component.
Failure to impose purchase tax on an organizer in an economically and legally justified purchase group: Unlike a contractor, who himself enjoys an increase in apartment prices and himself absorbs the increase in construction, the organizer does not take risks and opportunities in organizing the group. Usually his salary is determined in advance in a fixed amount.

■ The position of the Tax Authority: In the last two years, the Tax Authority has changed its position. The Authority believed that the system of agreements signed between the organizer and the group of buyers and between the buyers and themselves, deprived the group members of their discretion and therefore means that the organizer exercises the option himself, buys the land from its owner and immediately sells it to group members.

This meant imposing an additional purchase tax on the organizer on the full value of the land, in addition to the purchase tax paid by the group members (similar to the purchase of land by a contract).

■ The position of the courts: The district courts (Haifa and Tel Aviv) have consistently rejected the position of the Tax Authority in at least six cases brought before them. It was determined that the organizer did indeed purchase only an option and therefore sold only an option to the group members and cannot be seen as the one who purchased the land himself.

■ The Supreme Court's position: On all six cases, the Tax Authority appealed to the Supreme Court. At the hearing, Supreme Court justices made it clear that their position is the same as that of the district courts, and that they do not believe there is room for the taxation of the organizer in the cases before them. Following comments from the Supreme Court, the Tax Authority announced that it was withdrawing from the appeals, and they were dismissed.

In its ruling, the Supreme Court clarified that its position pertains to situations where the organizer's involvement is limited to providing a service in relation to the land, with the service increasing land marketability by allowing the landowner to enter into a transaction with many purchasers rather than a single purchaser. In doing so, the court reduced the meaning of its ruling to only one aspect of the organizers' action.

Meaning: The ruling effectively excludes the organizers from the stages after the purchase of the land, so that land buyers themselves will not be considered and will not be charged with purchase tax. In fact, the organizers are asked to abandon the group immediately after completing the purchase of the land and no - they may again encounter a purchase tax requirement from the tax authority. It is doubtful in our eyes whether in terms of the overall interest of the state in protecting the purchasers this is really the desired result.