What is the realty purchase tax?
The tax on a new home is one of the most expensive purchase taxes in Israel. In Hebrew it is known as Mas Richisha. There are different levels of purchase tax for Israeli citizens, new olim (immigrants), or a second home purchase.
Here are the current rates for Israeli citizens (until 16 Jan, 2023):
| Value of the property (in NIS) – from | Value (in NIS)– up to | Rate of Purchase Tax |
| 0 | 1,805,545 | 0% |
| 1,805,546 | 2,141,605 | 3.5% |
| 2,141,606 | 5,525,070 | 5% |
| 5,525,071 | 18,416,900 | 8% |
| 18,416,901 | And higher | 10% |
Here are the current rates for Olim (until 16 Jan, 2023):
| Value of the property (in NIS) – from | Value (in NIS)– up to | Rate of Purchase Tax |
| 0 | 1,902,945 | 0.5% |
| 1,902,946 | And higher | 5% |
The purchaser must meet the following conditions in order to be eligible:
- The purchase must be completed during the 8 year period starting 1-year pre-Aliyah.
- Reduced purchase tax rates can be used only once for the purchase of a residential property and once for the purchase of a commercial property.
- The Property purchased must be for the direct use of the individual (i.e. residential property must be used as a home and commercial property used for their business)
Surprisingly, the tax benefits of olim for this purchase tax are not advantageous for purchases that are below 5,000,000 NIS. Its wiser to use your rights as a regular Israeli citizen in such a case.
What are the realty purchase tax rules for foreigners?
The implications for foreign residents are explained by Epstein and Co law firm on their website:
…Prior to the Real Estate Tax Reform in 2014, Israeli and foreign residents enjoyed the partial and full exemptions if they owned only one apartment in Israel. As of 1.1.14 this changed. One who is not an Israeli Resident (whether an Israeli or foreign citizen) will be required to pay Property Tax at the regular rate without any exemptions, even if this is the buyer’s only home in Israel.
Nevertheless, the law allowed two exemptions to the Property Tax if the foreign citizen:
- Lives in Israel and is an Israeli resident, or
- Immigrates to Israel within two years of buying the apartment.
When a foreign citizen who is an Israeli resident purchased his/her first apartment in Israel, this person is entitled to receive a partial or full exemption according to the revised tax law. Residency is determined according to where the “center of the person’s life is”.
The foreign buyer must prove that his/her center of life is in Israel in order to benefit from the exemption. For this purpose, one can use the assumption that anyone who lives
in Israel for more than half a year (a minimum of 183 days a year) is considered that the center of his/her life is in Israel. The tax authorities might not initially accept this assumption and may require additional evidence to prove that this is indeed true (such as proofs of paying taxes in Israel, children’s educational institutions, employment, permanent residence etc.)”
An excellent video which explains the legal implications of purchasing an apartment is on the Nefesh BaNefesh website at Buying a Home in Israel. The first speaker, Attorney Debbie Solo, speaks about the Purchase tax around 30:00 into the video.
Read More about Tax Rates for New Olim.
There are many sites that can calculate your tax automatically . The official government site is only in Hebrew. However, there are a few sites with calculators that are in English: buyitinisraell has one, and myisraelproperty does, too.
For more information on buying in Israel, see Reduced Price Apartments: the Buyers’ Lottery Program, and Is Purchasing on Paper Better?
