A person receives a property tax bill to pay, for an apartment that is not his at all, just because the apartment belonged to his deceased mother. Does it make sense? This is exactly the case that was discussed in March, 2024, in a verdict of the Herzliya Magistrate's Court where the municipality demanded payment of city tax from a person who it believed would be the heir to an apartment, even though the estate had not yet been divided and the apartment was still not officially his.
Israeli law allows the municipality to charge city tax even from one who is not the owner of a property but only possess it, either as a tenant or in any other way. In the cases that reached the Court, it was determined that in order to examine who is supposed to pay city tax, it is necessary to examine who has the "most ties" to the property, and such person will be liable for the city tax. However, in many cases there is difficulty in determining this responsibility and therefore the relationship between the potential "possessor" and the degree of use and enjoyment of the property is reviewed, while examining the ability to control and utilize the property for the various needs. Thus, for example, in a case discussed by the Supreme Court in 2007, it was found that the obligation to pay city tax to the municipality for child-care medical stations was on the State of Israel, even though the assets are usually owned by the municipality itself, because the assets are used by the State for the purpose of providing medical services to the public. In another case from 2015, the question arose as to who is obligated to pay city tax on gas containers for supplying gas to residential buildings, when the very act of installing a gas container actually prevents any further use of the land. The Supreme Court found that although the gas company is the one that installs the container, at the end of the installation the use of the property (and therefore the city tax liability) passes to the tenants of the buildings.
Another case in which a person may be obligated to pay city tax is when it comes to a shareholder who owns 25% or more of the company's shares or is entitled to appoint its manager, as long as it is a property that is not used for residence and the company has dissolved or ceased its activities. The law requires as a condition for personal liability, that the shareholder received the company's assets for no consideration or for partial consideration, and when a company fell into an extremely difficult financial situation due to circumstances beyond its control and no assets were extracted to the shareholder, the Court exempted the shareholder from paying the city tax. However, the burden to show that all of the company's assets were used to pay its debts (to avoid personal liability) is the shareholder. In a case discussed in the Tel Aviv Court in May, 2019, a woman was charged with city tax debt because she was formally registered as a shareholder while she allows her husband to do as he pleases in the company and without any supervision and all for the purposes of avoiding truthful reports to the tax authorities. Thus, personal responsibility for city tax debt may also apply in the case where a person actually serves as a kind of straw-man for holding shares.
Thus, when dealing with real estate and in cases where a city tax debt may apply, it is recommended to be accompanied by legal advice to avoid being charged with city tax debts in the future even when the person is not the actual owner of the property.