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Real Estate Taxes for Buyers

tax paperwork

Buying property in Israel, especially for non-Israelis, has been a struggle in the past few years for a number of reasons:

  1. Property values in Israel have gone up. —Times of Israel.
  2. The rate of the USD has gone down. At the time I am writing this, the exchange rate is 3.11 NIS to the US Dollar,. 3 years ago, in Jan 2019, the USD was valued at 3.7 NIS.
  3. The high purchase taxes. If you the chance to make Aliya, you will save a lot in taxes.  As of the end of November 2021, the regular tax rates when buying a property were raised, and start from 8% and can go up to 10% brackets (depending on the purchase price).
  4. Single Residence Benefit – If you do not own an apartment in Israel, or if you own one but are looking to upgrade and sell your current one, as long as you are an Israeli resident, you are entitled to start with lower rates (0%, 3.5% and 5% – depending on the tax bracket). As a side note, depending on the purchase price, you might still reach the tax bracket of 8% and 10%.–(Excerpted from Nefesh B’Nefesh)

In general, you are only entitled to receive these benefits if you are an Israeli resident at the time of the purchase. There are two exceptions to this rule:

  1. If you become an Israeli resident within two years of the purchase, you are entitled to get the lower tax brackets, and can claim the difference back.
  2. If you make Aliyah within one year of the purchase (and up to seven years post-Aliyah), you are entitled to receive a special Aliyah benefit, and can claim the difference back.

Aliyah Tax Rights

If you are an Oleh, you will get a special benefit in the form of purchase tax brackets – 0.5% and 5% – depending on the purchase price, and as long as you are personally living in your apartment (not renting it out for example). That being said, this special Aliyah tax bracket is misleading. Don’t be tempted to use this benefit right away for a couple of reasons:

  1. As I wrote above, when a resident buys his/her first apartment in Israel, they are entitled to start with lower tax brackets: 0%, 3.5% and 5%. Aliyah benefits start from 0.5% purchase tax. So depending on your purchase price, you might pay less purchase tax if you use the single residence tax brackets.
  2. The Aliyah purchase tax benefit can be used even if you already own another apartment in Israel and up to seven years post-Aliyah. So with careful tax planning, you could buy two apartments in Israel and avoid the regular tax rates, saving you significant costs in purchase tax.

For more information on buying property, see our buyers’ page. Check out our Useful Links, too!

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