There is no doubt that one of the major tools that the government has been using to combat rising Israeli real estate prices in the last few years has been the high level of purchase tax for foreign residents and investors alike.
Whilst the actual tax rates do not change on a regular basis - only when the government deems it necessary - the property values that the tax rates are applied to are updated on annual basis according to the previous year's inflation figures.
We therefore set out below the updated figures for 2019, so that you can budget accurately when considering your upcoming Israeli real estate purchase.
As usual with tax, make sure to get advice from a qualified tax adviser/real estate lawyer. Furthermore, the tax rates below are correct as of January 1st 2016.
Foreign residents/Second homes (including for Israeli residents)
(i) From 0 – 5,194,225 ILS (of the property price) – 8%
(ii) Above 5,194,226 ILS – 10%
First-time Israeli resident buyer
(i) From 0 - 1,696,750 ILS – 0%
(ii) From 1,696,751 – 2,012,560 ILS – 3.5%
(iii) From 2,012,561 – 5,192,150 ILS – 5%
(iv) From 5,192,151 – 17,307,170 ILS – 8%
(v) Above 17,307,171 ILS – 10%
Oleh Chadash (New Immigrant)
(i) From 0 – 1,788,285 ILS – 0.5%
(ii) Above 1,788,286 ILS – 5%
There are a few important things to note for an oleh chadash who is buying real estate:
- One can claim the oleh rates if one makes Aliyah up to 12 months after purchasing.
- In the case of a married couple, only one of the couple need to be an oleh chadash in order to obtain the rates.
- An oleh has 7 years with which to utilise the rates.
- There can be situations, such as when buying a property for 1,600,175 ILS or lower, that it makes sense not to use the oleh rates, as for regular first time buyers the rate is less (0%) than the oleh rates (0.5%).
The tax is payable on each property purchased, and is calculated as a percentage of the property price. The tax rate is staggered, and is normally paid using a pay slip that is provided by the tax authority. The lawyer dealing with the transaction will usually obtain this pay slip, as well as ensuring that the correct tax rates are applied by the tax authority.
Given the large sums that can be involved, it is imperative to use a lawyer that specializes in real estate, and for foreign residents and olim chadashim in particular, one that has experience working with this segment of buyers.
Nonetheless, in the spirit of caveat emptor, it is important for buyers to also be aware of the above figures, both so that they can prepare adequately in advance, and so that they can ensure that they are not paying too much over to the Israeli Tax man.
Thinking about buying Israeli Real Estate? Get in touch now and we will help you find what you are looking for, help you budget properly, get you financing if necessary, and connect you with the right professionals!