Tax Authority Launches Investigation Blitz Based on Land Registry Data

Two months before the voluntary disclosure window closes, the Israel Tax Authority is stepping up enforcement and publishing “samples” of its recent findings in the media. Most of the criminal cases recently opened by the Israel Tax Authority concern unreported income from renting out residential apartments. This became possible once the Israel Tax Authority gained access to the Land Registry database.

In a case published recently, suspicion arose that between 2018 and 2025, at least four apartments were rented out to different tenants, generating income of at least 3 million ₪. According to the publications, the funds were deposited into the bank accounts of the person connected to the properties and of her two children but were not duly reported. It was also stated that each of the apartments was rented out for an amount significantly higher than the statutory exemption threshold for residential rental income, which stands at ₪5,654 as of 2026.

It is important to emphasize that these are suspicions only, the investigation is ongoing, and every person is entitled to the presumption of innocence.

How Might the Israel Tax Authority Analyze Such a Situation?

From a professional perspective, the review does not focus only on the mere receipt of rental income, but also on broader questions: how many apartments were rented out, who owned each apartment, into which bank accounts the funds were transferred, and whether there is a match between the actual income and the reporting to the Israel Tax Authority, if any. These questions are relevant not only to high-profile cases, but also to private families that own one or several apartments and assume that the income is simple and does not require ongoing review.

Another aspect that may draw the attention of the Israel Tax Authority is how the income was managed in practice. When rental funds are deposited not only into one account but into several accounts, including accounts of family members, the review does not stop at the formal registration. In such cases, the authority may examine who benefited from the income in substance, who controlled the properties, who managed the rentals, and who was required to bear the reporting obligation. Therefore, the mere deposit of funds into the account of a child or another family member does not necessarily change the identity of the person liable to report or pay tax.

In this context, it is important to clarify a point that often comes up among landlords: not all residential rental income is tax-exempt, and it cannot always be assumed that there is no reporting obligation. In Israel, there are several possible tax tracks for residential rental income, including an exemption up to a certain threshold, a reduced tax track, and the regular tax track. When the income exceeds the relevant threshold, or when the ownership and rental structure is more complex, a specific review is required of the applicable tax track and the reporting obligations that apply to the landlord.

In recent years, the Israel Tax Authority has been devoting more focused attention to the residential rental sector. It examines not only the reports that were filed, but also possible gaps between ownership of properties, the flow of funds, and the situation in practice. For landlords, this means that greater importance should be placed on the consistency between the ownership structure, the agreements, the deposits, and the tax reporting, even where the area was previously perceived as relatively simple or as subject to limited enforcement.

Another case published recently illustrates the same point from a different angle. According to the publications, a Jerusalem resident was suspected of failing to report income of approximately ₪3.4 million from renting out nine apartments in the city between 2016 and 2021. Here too, the issue is not only the amount of income, but also the structure of property ownership, the scope of the activity, and the related reporting obligation. The review in his case began in the context of an application for a capital gains tax relief upon the sale of an apartment. As part of that review, documents were requested, and according to the suspicion, a gap emerged between the information provided in the real estate proceeding and the reports on rental income. It was later reported that, following the inquiry, income was reported for the years 2022 to 2025, but not for the earlier years that were reviewed. From a professional perspective, this is a reminder that tax reviews do not always take place in isolation, and sometimes a specific request in one context may bring broader reporting issues to the surface.

Landlords renting out residential apartments have three main tracks for reporting rental income:

• The exemption track, which may apply up to a monthly threshold of ₪5,654 as of 2026. When the rent exceeds the threshold, the exemption is gradually reduced, and when the monthly income reaches twice the threshold, meaning ₪11,308, the exemption is eliminated.
• The second track is the reduced 10% tax track on the full rental income, but generally without the ability to deduct expenses, depreciation, or ordinary offsets.
• The third track is the regular track, under which the income is taxed at the regular tax rates, but recognized expenses may be deducted in appropriate cases.

The choice of track can have a material effect on both the tax liability and the manner of reporting.

In our professional experience, in many cases the problem is not only an intention to conceal, but also conduct that develops over time without proper control. An apartment purchased years ago, another apartment added later, a child helping with the management, money entering one account and then another, and a general sense that “we will deal with it when we get there.” But in tax matters, the delay itself is sometimes what creates the main risk. As time passes, it becomes harder to explain, harder to collect documents, and harder to argue that it was merely a lack of attention.

We have previously encountered a case involving a family that held several residential apartments, where rental income was deposited over the years into several different accounts within the family. The family members were sure that everything was clear among themselves, but when an orderly review was carried out, it became apparent that there was no complete alignment between the registration, the agreements, and the deposits in practice. Before any external approach was made, the facts were fully mapped and a transparent and careful reporting approach was put in place. Time does not work in favor of those who ignore the issue. Therefore, anyone who rents out an apartment in Israel, and certainly anyone who owns several apartments, should know exactly which tax track applies, whether a reporting obligation exists, and whether there is alignment between the ownership, the income, the deposits, and the documents. There is no need to panic, but it is also not advisable to assume that the current quiet ensures quiet in the future.

Nimrod Yaron & Co. specializes in Israeli and international taxation. Our team is composed of professionals with years of experience at the Israel Tax Authority, alongside experience at leading firms and law offices, bringing together legal and economic perspectives. We advise private and public companies, Israeli and foreign companies, global venture capital funds, and clients seeking focused advice in clear and practical language. We also work with a professional network of accounting firms and law firms around the world in order to provide comprehensive support in cross-border matters.

If you rent out an apartment, if your family owns several properties, or if you are unsure whether the income was reported correctly over the years, now is the time to conduct an orderly review and regularize reporting in a responsible and transparent manner. A strategic consultation meeting can help you understand the full picture before it becomes more complex.

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