During discussions on Israel’s 2025 state budget, which was approved by the Knesset this week, the Finance Committee raised a proposed law which would have required online platforms like Airbnb and Booking.com, used for short-term rental deals, to report all transactions. The aim of such a law, proposed by the Israel Tax Authority and the Ministry of Finance, was to provide the authorities with tools to cope with the trend of unpaid taxes on unreported short-term rentals.
But discussions on the bill were one of the shortest ever held by the Finance Committee. The bill was opposed by every MK present at the meeting, led by Orit Farkash Hacohen (National Unity Party) who charged that the Ministry of Finance was trying to make the digital platforms into “informers.” Within just 15 minutes MK Yinon Azoulay (Shas) closed the debate by throwing the proposal out of the budget bill.
This effectively buried the bill, as pushing it through “regular” legislative procedures would be almost impossible given the strong opposition to such real estate reporting obligations by Finance Committee chairman MK Moshe Gafni (United Torah Judaism). During the discussion, MKs also criticized the Ministry of Finance representatives for the small state revenues the bill would bring.
20,000 apartments rented
Is the short-term rental market really generating “small money”? A study conducted by the Israel Tax Authority found that in 2018-2019, there were 30,000-35,000 apartments in Israel rented out for short-term vacations through Airbnb, of which between 16,000-20,000 were active, generating over NIS 1 billion. The Tax Authority estimates that the current number of apartments rented for short-term vacations around Israel is about 20,000.
According to a source at the Tax Authority, “In 2018-2019, there was a very big peak in Airbnb apartments and revenue was then valued at more than a NIS 1 billion for vacations and leisure. Since then, the market has undergone major changes. The Covid pandemic had a great impact and then the war, and in a check we undertook on the Airbnb website in early 2025, we found that there are currently around 20,000 apartments registered in Israel and about 10,000-12,000 are active around the country. Our estimate is that in a normal year, the revenues from taxing this market would be about NIS 100-150 million and in weaker years about NIS 30 million”
He added, “It is clear that we have an industry here parallel to hotels that constitutes a significant part of the market, which is certainly large enough that we want it to be reported properly and taxed properly. It would be a significant industry in terms of lost revenue. We want the tax to be neutral between different businesses, and the fact that we cannot fully tax this industry gives an unfair competitive advantage to those businesses that are not taxed.”
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By law, renting an apartment in Israel is taxed in several ways, including an exemption for income up to NIS 5,600 per month, a reduced tax rate of 10% of the rent, and a marginal tax rate based on the owner’s tax rates, when an annual financial report is filed. But these attractive tax rates do not apply to short-term rentals of apartments or rooms. In terms of tax law, apartments rented for the short term are not considered residential rental properties, but rather business rental properties, subject to a marginal tax rate that can reach about 50%.
The struggle to collect tax on the short-term rental market has been ongoing for years, and was at the heart of a petition to the High Court filed by the Israel Hotel Association against the Tax Authority in early 2020. The petition claimed that the Tax Authority does not enforce tax laws on short-term apartment rentals, discriminating against hotels in Israel that are taxed. The High Court recommended that the Hotel Association withdraw the petition filed against Airbnb, due to the effects of the Covid pandemic on the tourism industry, while the Tax Authority acted to tax the fledgling market. Among other things, it has conducted audits over the years, stressing short-term rentals, through sites such as Airbnb and Booking.com. However, this was a drop in the ocean of black money in the industry, which the Tax Authority assesses at NIS 100-150 million or more per year.
Now, the Hotel Association is criticizing the MKs blocking the bill to close the loophole. Data collected by the Hotel Association shows that in Tel Aviv alone, there are about NIS 100 million in taxes annually that are not collected. The estimate is based, among other things, on data collected by AirDNA – an international company that monitors data on rental properties from various online platforms.
45% profitability in Tel Aviv
Israel Hotels Association CEO Sivan Datouker says, “At a time of significant across-the-board cuts in government ministries – and when the bill that the Finance Ministry itself brought as part of the Economic Arrangements Law to impose taxation on digital platforms for tourism remains in the Finance Committee, and it is doubtful that it will be advanced – Israel is once again lagging behind the rest of the Western world, where there is taxation on platforms like Airbnb and Booking.com.
“Estimates by professionals are that such a tax could bring in about NIS 100 million, if not more, to the state coffers. According to AirDNA data, there are currently 2,864 Airbnb apartments on offer in Tel Aviv (compared with about 6,000 on the eve of the war and over 13,000 at the peak when the Eurovision song contest was held in Tel Aviv), and the average annual income per apartment this year was about NIS 90,000. That is, this is revenue of NIS 257 million. If the state collects 30% tax from these revenues, we will reach about NIS 77 million, just from renting apartments in Tel Aviv. The data also show that the average rate is NIS 721 per night and the apartment operator’s profit per night is about NIS 327 – 45% profitability.
“Higher turnovers”
Tel Aviv Hotel Association director general Eli Ziv adds, “The number of Airbnb apartments and similar ones in Tel Aviv is already about 50% higher than the number of hotel rooms in the city (in a normal year) and is mostly managed by real estate companies and brokers, with high financial turnover. Some of the luxury apartments reached a revenue of more than $150,000 in 2019, and there is no reason why they should not pay tax legally.”
In 2020, the OECD proposed a model for legislation that would require platform operators to report to the local tax authority about users who produce income through them. The EU also set up a similar model, requiring member states to enact reporting obligations in their domestic laws, and most have already enacted laws on the issue, or are in advanced stages of enacting the law. Other countries, such as Australia and the UK, have also enacted similar reporting requirements.
In a recent interview with “Globes”, Minister of Finance Bezalel Smotrich spoke of the need to address tax evasion and black money in the real estate market, saying that Finance Committee chairman Moshe Gafni “Is pushing me on moves in the area of black money. One of them is the reporting of apartment landlord, including Airbnb apartments.” He added that he would continue to promote the demand for a general reporting requirement on property rentals.
Published by Globes, Israel business news – en.globes.co.il – on March 27, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
