Today we discuss one of the least-liked taxes for buyers of Israeli Real Estate – Purchase Tax.
Its unpopularity among buyers is primarily caused by the fact that:
(i) As a major tool in the “war” against house-price inflation, this tax can be extremely high in certain cases.
(ii) The tax rates vary between the ‘status’ of the buyer.
We will therefore lay out below the differing tax rates that are applicable, so that anyone planning to buy a home in Israel can gauge how much purchase tax they are likely to pay, enabling accurate budgeting and avoiding unnecessary stress during the process (there is likely to be enough of that anyway!).
As with anything tax-related, the usual caveats apply, and that is that one should always seek advice from a qualified tax adviser/real estate lawyer. Furthermore, the rates below are correct as of January 1st 2016.
Foreign residents/Second homes for Israeli residents
(i) From 0 – 4,896,615 ILS (of the property price) – 8%
(ii) Above 4,896,615 ILS – 10%
First-time Israeli resident buyer
(i) From 0 - 1,600,175 ILS – 0%
(ii) From 1,600,175 – 1,898,005 ILS – 3.5%
(iii) From 1,898,005 – 4,896,615 ILS – 5%
(iv) From 4,896,615 – 16,322,055 ILS – 8%
(v) Above 16,322,055 ILS – 10%
Oleh Chadash (New Immigrant)
(i) From 0 – 1,735,445 ILS – 0.5%
(ii) Above 1,735,445 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 utilize 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 Taxman.
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!