In Israel, there are of course many synagogues, mosques, and large well-known churches, all of which receive a full exemption from municipal taxes (arnona). Yes, a full exemption! Anyone defined as a house of worship does not have to pay even a single shekel on municipal taxes.
There are many small churches in Israel that do not enjoy the municipal tax exemption – sometimes due to a lack of knowledge of their rights, and sometimes simply because the municipalities refuse to grant them the exemption to which they are entitled.
Section 4(a) of the Municipalities Ordinance states that no municipal tax shall be imposed on a building or occupied land “whose ownership and possession are in the hands of any religious community or religious institution, provided that the building or occupied land serves that religious community or religious institution: (a) as a place of worship, mikveh…”
In many places in Israel, there are small churches that serve members of different communities as different houses of worship. However, Christian worship and rituals differ from those of Judaism, and many modern communities incorporate games and interesting learning activities for the community’s children as part of their prayer rituals, which is often perceived by municipal authorities as unrelated to a house of worship. As a result, even those who are entitled may find themselves with a negative response.
The process of obtaining the exemption begins by filing an objection to the municipal tax charge that will be sent. The objection must be submitted within three months from the date of taking possession of the property or by March 31 of the tax year. After submitting the objection, the municipality is required to respond within sixty days. If no response is given within two months, the response is automatically positive. Therefore, municipalities will rush to provide a timely response.
If the response received is negative for any reason, an appeal must be filed with the Municipal Tax Appeals Committee. The committee must consider the response received and often will also visit the property itself to observe the prayer service if it takes place on weekdays and get a first-hand impression.
If the Appeals Committee does not overturn the decision, and the committee’s ruling states that the place does not primarily serve as a place of worship and is therefore not entitled to a municipal tax exemption, an appeal must be filed with the Administrative Court- in district court.
It is important to understand that often, a lack of understanding and familiarity with the subject matter by municipal officials leads to unjustified refusals regarding municipal tax exemptions. Of course, the municipality’s primary interest is not to grant the discount, particularly when these churches are often located in commercial and industrial areas, as it is not simple to run a church in Israel, where there is sometimes prejudice against Christians. Most of these churches therefore choose to operate in industrial areas rather than residential areas to reduce friction. Since the loss of municipal tax revenue in these areas is higher for municipalities, they tend to look for reasons not to approve the exemption. It is therefore often advisable to seek legal advice before submitting the initial objection to avoid later, costly legal proceedings.
To schedule a meeting with a lawyer specializing in municipal tax discounts for houses of worship, please contact our office.