The Israeli Tax Authority (ITA) recently announced, during a discussion of the parliamentary committee, that it is about to publish a tax circular regarding renting apartments for a short periods of time, including through Internet platforms such as Airbnb.

According to recently released data, In 2015 about 128,000 tourists visiting Israel rented apartments through Airbnb. This represents an increase of 45% compared to 2014, as well as an increase of 40% in the number of Israelis who offer their apartments for rent through Airbnb, which is now over 13,000.

Renting apartments on a platform such as Airbnb raises a number of legal questions, and it has a lot of gray areas. If we add to that the silence of the legislature and the tax authorities, it is a magic recipe for not reporting and evading taxes.

Should the landlord have a business operation, expertise and multiple rentals, he can easily fall within the definition of a dealer who is required to pay a tax for a business income, and therefore subjected to pay taxes in accordance with his marginal tax brackets (up to 48%). Moreover, not only can the Israel Tax Authority  knock on the landlord’s door, but  also the VAT authorities, Social Security, the Municipal Property tax department and others.

However, there are some gray areas here, for example, when a person rents out his or her apartment for a month or more through Airbnb. There is a question if is this person should be classified as a dealer, or is it a case of a regular tenancy, where a person can enjoy a tax exemption or a tax reduction of 10%.

The ITA announced that as part of the discussions in the House Committee it is working on a tax notice on the subject. Until this notice comes out, and even after it does, there are many tools for building and planning a tax strategy for people who choose to rent their properties through Airbnb.