Software Company Arnona Classification :2024-2025
Navigating the legal complexities of achieving "Sofware House" classification is essential for every Software company in Israel wishing to reduce their Municipal Property Tax (Arnona). While some companies may consider handling classification independently, consulting a professional may mitigate the risks and complexities in potential misclassification.
Municipal Property Tax (Arnona) calculations in Israel
Seeking proper classification as a software company is pivotal for reducing the Arnona burden:
The highest rate in Tel Aviv's property tax decree is for “Offices and Services”. Those located in Zone 1, will pay 420.34 ₪/sqm.
In comparison, the rate for “Software house” is 183.64 ₪/sqm. A 56% reduction per sqm.
Unlike countries whose property tax is primarily based on real estate value, Israel's system is multifaceted. Arnona charges in Israel consider property size, location, and user classification.
In Israeli municipalities, a classification known as "Offices and Services" often carries one of the highest tariffs, typically double that for software houses.
When should you submit your request?
Unlike other classifications, software companies applications can be submitted year-round.
Legal assistance often increases the chance to receive classification for more than one year at a time.
Software House Arnona Classification Paradox
The "Software House" classification is another mean by which the State of Israel bolsters its hi-tech sector and supports the growth of software companies and startups vital to the economy.
However, municipalities, relying on business Arnona taxes for their budgets, exercise caution in property classification. Numerous court rulings contributed further complexity and ambiguity to the definition of a "software house".
In practice, most independent classification requests face rejection, underscoring the need for professional legal guidance.
Your classification for "Software House" is likely to be rejected
While submitting requests independently is feasible, success hinges on adhering to details outlined in the Arnona decree and court rulings. Consulting with an experienced Arnona lawyer is advisable to ensure compliance and best practice.
If your tech or sofware company:
Then your request for classification as a software house would most likely be rejected on the threshold, even if you are a software company.
:Increase your chances by
Following your request submission, the municipality will gather information, including property inspection and financial review.
Ensuring the submitted data supports your request and providing relevant explanations during inspection are essential.
Property layout plays an important role in classification. Often, Arnona discounts for software houses apply only to the development areas used by programmers, while office rates are charged for management areas.
Obtaining professional advice before submission ensures accuracy and increases approval chances.
Each municipality sets its own criteria for classification. Criteria may specify whether reduced fees apply solely to software development or include other technology-related industries.
If the municipal decree lacks a specific "software company" classification, your lawyer may request an "industry" classification, often offering a reduced tariff.
When submitting your classification request, the municipality may request various documents and data. While not obligated to provide every item, refusal to do so could affect your application. It is crucial to correctly handle those requests to avoid rejection.
Misrepresentation or inconsistencies may lead to rejection and legal complications. Engaging an Arnona attorney from the outset ensures proper submission.
Our professionalism at your service
Noa Talbi Law Firm ranks among the top of Duns'100 and BDI's leading municipal tax lawyers.
The firm has extensive experience in representing software houses in requests for Arnona discounts and in the process of changing Arnona classifications.
In 2024, Noa Talbi Law Firm achieved 100% success rate in obtaining software house classification for its clients
Among the clients represented in 2024, many would have failed had they proceeded independently with their classification process. Following the precise representation of our office, the municipality agreed to grant the desired classification to the company.
In order for us to respond to your address in the most professional manner, we'd appreciate it if a sample of the existing municipal property tax bill, a notice of municipal property tax charge or the notice letter from the municipality which you wish to appeal is attached thereto.
