The Church of the Holy Sepulchre is expected to open again Wednesday morning after it was closed on Sunday in protest over government changes to the way church properties are taxed.

Christian leaders who have custody of the site - including representatives of the Roman Catholic, Greek Orthodox and Armenian churches - said it would reopen after officials suspended moves to impose taxes on church-owned assets in the city. 

Jerusalem Mayor Nir Barkat had earlier said that commercial buildings in Jerusalem not used as places of worship but owned by the churches - such as restaurants and offices - would be taxed and that the municipality was already owed millions in back taxes.

A statement from the office of Prime Minister Benjamin Netanyahu reportedly said that collection actions the municipality had taken in recent weeks would be suspended and that a team was being established to formulate a solution with church officials. 

Church leaders welcomed the move, saying the site would be opened from 4am on Wednesday.

"After the constructive intervention of the Prime Minister, the Churches look forward to engage with Minister Hanegbi, and with all those who love Jerusalem to ensure that Our Holy City, where our Christian presence continues to face challenges, remains a place where the three Monotheistic faiths may live and thrive together," the church leaders said in a statement.

As well as protesting against the imposition of property taxes, Christian leaders had also been protesting proposed legislation which they feared would allow the state to expropriate church property.

Mr Netanyahu's office reportedly said it would also freeze moves on the proposed legislation.