Every Square Meter Counts: Understanding Municipal Tax (Arnona)

Municipal tax (Arnona) forms a significant part of the bills we have to pay every month for our home or apartment. Why does the tax rate vary from one part of the city to another? Who is entitled to a discount? And must we pay for an empty apartment? All the answers coming up…

We get the bill every couple of months, or arrange a standing order at the bank, and pay without asking too many questions as part of our regular bills. But what is municipal tax (Arnona), why do we pay it, and how is it calculated? Arnona is a tax applied to every building within the area of jurisdiction of a local authority, whether it is used for residential purposes, for business, or for any other function. The local authority uses the income from Arnona to cover its costs, including municipal infrastructures, education, and public services.Every local authority must approve an annual order imposing Arnona. The order details the different classifications and tariffs used to calculate Arnona payments.

How is Arnona calculated?The Arnona payment is calculated according to the following parameters:

Location of the property – the area of the local authority is divided into zones that pay different levels of Arnona. In order to find out what zone your apartment is in, you can refer to the map of zones on the local authority website or review the maps in person at the Payment Department.

Classification of the property – there are 12 key classifications used for determining the Arnona rate: residential, offices, banks, industry, hotels, petty industry, and so forth. The Arnona rate varies according to the classification; some classifications entitle the owner to a discount.

Use of the property – the main distinction in terms of the use of property is between residential and non-residential use, based on the classifications mentioned above.

Area of the property – the floor area of the property in square meters. The calculation method varies from one authority to the next; four different systems are used:Net area: The entire area of the apartment, including the area under the internal and external walls, but excluding balconies. If the apartment shares walls with another apartment, each pays for half the area.Gross area: The entire area of the apartment, including the area under the internal and external walls, and the apartment’s share of the stairwell relative to all the apartments in the building.Internal apartment area (“net-net”): The net area, including covered balconies, but excluding the area outside the external walls, such as an open balconies.Attached area (“gross-gross”): The gross area, including all possible additions, such as parking, storeroom, the apartment’s relative share of the roof and stairwell, etc.

Who is liable for paying Arnona?Payment of Arnona falls on the holder of the property who is considered to have the closest affinity to it. If the apartment is occupied by a tenant for a period of at least 12 months, or by a tenant paying “key money,” the tenant is liable for payment of Arnona.

How do I transfer the Arnona bill?When leaving a rented apartment or selling your home, it is very important to make sure that the Arnona account is transferred to the new occupants. The regulations state that when the occupiers of a property change (i.e. when a tenant leaves, a new tenant enters, an apartment is sold, or another change is made to the registration), the owner of the property must inform the local authority in writing, by means of the “Declaration Form concerning Change of Occupant of Property” – form number 23351, which can be downloaded from the local authority website.

Who is entitled to a discount on Arnona payments? The local authority is entitled to grant a permanent or temporary discount on Arnona payments to those eligible according to the Arnona Discount Table, published each year on the Interior Ministry website. For example, disabled persons, senior citizens, new immigrants, soldiers performing compulsory national service, and students are all eligible for a discount according to various criteria. In some cases, a discount may also be granted according to the type of property: an empty property (depending on the period involved), educational, religious, or charitable institutions, agriculture land during the Shmita year, and so forth.In addition, people on low incomes may be eligible for a discount in Arnona payments on the basis of a test of their monthly income as established by the Interior Ministry:

A single breadwinner earning up to NIS 2,250 will be eligible for a discount of up to 80% on Arnona payments.A single breadwinner earning between NIS 2,551 – 2,933 will be eligible for a discount of up to 60%.A couple jointly earning up to NIS 3,824 will be eligible for a discount of up to 80%.However, it is important to bear in mind that the discount according to the means test is not compulsory. The local authority can decide whether or not to grant the discount, or to grant a partial discount, according to the conditions it establishes. We suggest you contact the local authority for details regarding the discount.One last tip: If you own a property that does not have any tenants and is unfurnished, you can receive a one-time exemption from Arnona payments for a period of six months.

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