Is Airbnb legal in Tel Aviv-Yafo?

Tel Aviv has been grappling with the rise in short-term rentals facilitated by platforms like Airbnb. The city's burgeoning Airbnb market has raised concerns about housing affordability and the impact on local hotel industries. In an effort to regulate and control this growth, the Tel Aviv Municipality has considered implementing measures such as capping short-term rental usage to a maximum of 90 days per year for individual properties.

From a taxation standpoint, Israeli tax authorities view Airbnb income as business income rather than passive rental income. As such, landlords must register as businesses and comply with the requisite tax obligations, which include income tax, Bituach Leumi (social security), and potentially VAT, based on certain conditions. Notably, these short-term rental incomes are ineligible for the favorable tax treatments typically available for long-term rentals, such as the linear 10% tax rate or the monthly tax exemption up to a certain threshold.

Moreover, a high percentage of Airbnb hosts in Tel Aviv have been found guilty of tax evasion, which has prompted more stringent enforcement from the tax authorities, including undercover operations to identify non-compliant hosts. As the regulations continue to grow in complexity, it is advisable for Airbnb hosts to consult with tax experts to ensure they meet all legal obligations and optimize their tax positions effectively.