In brief
When exiting a project abroad there are two main routes: selling the asset out of the special purpose company, or selling the shares of the company itself. In an asset sale the buyer receives a clean asset and the liabilities stay with you; in a share sale the buyer receives the company with its entire history, and so will check more and require representations and an indemnity. The differences in tax, VAT and timing depend on local law and on the tax treaty with Israel, so the exit is planned when you build the structure.
Key takeaways
- 1In an asset sale the land and the building pass to the buyer; in a share sale the company passes, with the asset, the contracts, the permits and also the debts and liabilities.
- 2A buyer of shares will examine the company's entire history and require representations, an indemnity and funds in escrow; a buyer of an asset will mainly examine the asset.
- 3In the European Union, the supply of a new building before first occupation is usually subject to VAT, whereas a transfer of shares is exempt as a rule, but there are local exceptions.
- 4Many tax treaties allow the country where the property is located to tax a gain on the sale of shares in a company deriving most of its value from immovable property, so a share sale is not necessarily exempt from tax there.
- 5Selling units one by one usually yields a higher price per unit, and a block sale shortens the timeline and reduces exposure. The decision depends on cash flow, the lender and the market.
Most developers plan their entry into a project in great detail and their exit in one sentence: "we will sell the apartments". But the question of what exactly you will sell, to whom and in what structure has a direct effect on tax, on the liabilities that will remain with you and on the time until the money comes back to Israel.
This guide compares selling the asset with selling the shares of the special purpose company that holds it, and selling units one by one with a block sale. It is general. Tax and VAT rules differ in every country, and the decision in a specific project requires review by a local and an Israeli tax adviser.
What is the difference between an asset sale and a share sale?
In an asset sale (asset deal) the special purpose company sells the land and the building, and the proceeds go into the company. In a share sale (share deal) you, the shareholders, sell the company itself, and the buyer steps into your shoes as the owner of a company that continues to hold the asset.
| Issue | Asset sale | Share sale |
|---|---|---|
| What passes to the buyer | The asset, and sometimes contracts assigned to the buyer with consent | The whole company: asset, contracts, permits, debts and liabilities |
| Past liabilities | Remain in the selling company | Pass with the company, so they are dealt with through representations and an indemnity |
| Registration | Transfer of title in the land register, usually before a notary | Transfer of shares and registration in the companies registry; the asset does not change owner |
| Transfer tax and fees | Usually apply to the transfer of the immovable property | Depends on the country; in some countries they also apply to the transfer of shares in a company that consists mainly of immovable property |
| VAT | May apply, especially to a new building | A transfer of shares is exempt as a rule |
| Tax on the gain | In the company, and then tax on the distribution of the dividend | At shareholder level, under local law, the treaty and Israeli law |
| Buyer's due diligence | Focused on the asset | Broad: the entire corporate, tax and contractual history |
| Typical preference | A buyer who wants a clean asset | A seller who wants a clean exit, and a buyer who wants to keep permits and contracts |
How does the tax change between the two routes?
In an asset sale there are usually two layers of tax: corporate tax on the gain in the special purpose company, and tax on the dividend when the money is distributed to the shareholders, including withholding tax in the company's country and tax in Israel, subject to credit under the treaty. In a share sale there is sometimes only one layer, at shareholder level. This is why sellers tend to prefer a share sale.
But that is not the end of the calculation. First, many tax treaties include a provision along the lines of Article 13(4) of the OECD Model Tax Convention, which allows the country where the immovable property is located to tax a gain on the sale of shares deriving more than half of their value, directly or indirectly, from immovable property in that country, at any time during the 365 days preceding the sale. Whether such a provision exists in the treaty between Israel and the project country, and in what wording, must be checked in the specific treaty.
Second, the buyer knows how to calculate. When buying shares, the buyer receives an asset at the company's historical tax cost, not at the price paid. It follows that when the buyer sells in the future, the company will pay tax on the difference. Buyers price in this deferred tax and ask for a discount because of it, so in practice the seller's tax advantage is shared between the parties in the negotiation.
Israeli residents are taxed in Israel on a gain from the sale of shares in a foreign company and on dividends from it, and receive a credit for foreign tax under the law and the treaty. The comparison between the two routes must include the tax in Israel, not only the tax in the project country.
What happens with VAT?
In the European Union, under the VAT Directive (2006/112/EC), the supply of a new building before first occupation, and of building land, is as a rule subject to VAT, whereas the supply of an old building is exempt as a rule, with an option for member states to allow an election to charge VAT. A transfer of shares is exempt from VAT as a rule. Member states may also provide that the transfer of a totality of assets of a business is not treated as a supply.
The practical meaning: in an asset sale of a new project, VAT can be a significant part of the price. For a VAT-registered buyer who can recover it, this is mainly a cash flow question, and for a private buyer it is a cost. In a share sale there is no VAT on the transaction itself, but you need to check the company's VAT position, including deductions made during construction that may be adjusted if the use of the asset changes.
Which liabilities remain with you?
In a share sale, the buyer receives everything the company has done: tax debts, claims by a contractor or supplier, permit breaches, obligations to buyers who have already bought units, and employees if any. So the buyer will require:
- Representations and warranties on the condition of the company and the asset.
- A specific indemnity for risks identified in the due diligence, such as a tax dispute or an open claim.
- Funds in escrow or a holdback of part of the consideration for a defined period.
- Sometimes warranty and indemnity insurance, which replaces part of the sellers' personal liability.
As sellers, you want a cap on liability, a limited period for bringing claims, and full disclosure that excludes from liability what you have disclosed to the buyer.
In an asset sale the picture is reversed: the buyer receives an asset, and the liabilities remain in the special purpose company. If the company has sold units to buyers in the past, its liability to them for defects does not disappear. So you cannot wind up the company immediately after the sale. You need to leave a reserve in it for possible claims, or back the liability with an undertaking from the contractor.
What will the buyer check?
A serious buyer will ask for a data room. It is worth preparing it in advance, because a document missing at the crucial moment delays the transaction or lowers the price:
- An up-to-date land register extract for the land and the units, and existing encumbrances.
- The building permit, its amendments, the occupancy certificate and the registration of the building in the land register.
- The construction contract, guarantees, insurance and completion certificates.
- Contracts with buyers, advance payments received and the status of handovers.
- The financing agreement, a balance letter from the bank and the release conditions of the encumbrances.
- In a share sale: incorporation documents, resolutions, financial statements, tax returns, certificates of no outstanding debts and the register of beneficial owners.
How long does each route take?
An asset sale depends on local real property law: a notary, tax and municipal certificates, and sometimes pre-emption rights of third parties that must be respected before signing. A share sale depends on consents: the financing bank, which usually prohibits a change of control without its consent, and sometimes parties to material contracts containing a change of control clause. Both routes may take a similar amount of time, but the obstacles are different, so it is worth identifying them early.
Sell units one by one or in a block?
Selling to individuals usually yields a higher price per unit, while a block sale to a single buyer, for example a fund or an institutional investor, shortens the timeline and reduces the risk. The decision depends on cash flow, the lender's requirements and the state of the market.
| Issue | Units one by one | Block sale |
|---|---|---|
| Price per unit | Usually higher | Lower, in return for certainty and volume |
| Time | Long, at the pace of the market | A single transaction |
| Marketing and brokerage costs | High | Relatively low |
| Regulation | Consumer protection laws and the rules on selling apartments apply to every transaction | A transaction between professional parties, with fewer consumer protections |
| Financing | Release of the mortgage for each unit with the bank | Repayment of the loan in a single transaction |
| Liability for defects | Towards many buyers | Towards a single buyer, under the agreement |
There are also intermediate solutions: selling some of the units to individuals and the rest in a block, or signing in advance with an institutional buyer an undertaking to purchase units not sold by a certain date. Each of them needs to be built into the financing plan and the shareholders' agreement.
When do you plan the exit?
Before the entry. The holding structure, the country of incorporation of the holding company, the shareholders' agreement and the financing agreement determine in advance which exit routes will be open. We accompany Israeli developers in planning the exit already at the structuring stage, and in negotiating the sale agreement and preparing the data room at the sale stage, together with lawyers and tax advisers licensed in the project country and in Israel.
This article is general information as of October 2026 and is not legal or tax advice for a specific case. Tax, VAT and transfer tax rules vary between countries and over time. Before deciding on the exit route, it is worth obtaining an opinion from a tax adviser in the project country and in Israel.
Frequently asked questions
What is better for the seller: an asset sale or a share sale?
There is no general answer. A share sale sometimes saves a layer of tax and passes the liabilities to the buyer, but the buyer will ask for a discount because of the deferred tax and require representations and an indemnity. An asset sale is simpler for the buyer, but leaves the liabilities in your company.
Is a sale of shares in a company holding real estate exempt from tax in the country where the property is located?
Not necessarily. Many tax treaties allow the country where the immovable property is located to tax a gain on the sale of shares in a company deriving most of its value from immovable property there, and in some countries transfer taxes also apply to such a sale. You need to check local law and the treaty with Israel.
Is there VAT on the sale of a new building in the European Union?
As a rule, yes. Under the VAT Directive, the supply of a new building before first occupation is subject to VAT, while the supply of an old building is exempt as a rule. The definitions and exceptions are set by the law of each country.
Can we wind up the company immediately after selling the project?
It is usually not advisable. If the company sold units to buyers, it remains liable to them for defects for the period set in the contract and by law. You need to leave a reserve for claims or back the liability with an undertaking from the contractor before winding up.
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