Ultimate Guide
Real Estate Taxes in Israel
Understand every tax that applies when buying, owning, or selling property in Israel. This guide covers Mas Rechisha (purchase tax), Mas Shevach (capital gains tax), Arnona (municipal tax), and VAT implications specifically for foreign buyers and investors.
1 Mas Rechisha — Purchase Tax
Purchase tax is the main tax buyers pay. For Israeli residents buying their first home, there are significant exemptions (up to ~1.8M NIS tax-free). Foreign buyers and investors pay a flat rate starting at 8% on the first bracket and going up to 10% on higher amounts. The tax is calculated on a sliding scale and must be paid within 60 days of signing the purchase contract.
2 Mas Shevach — Capital Gains Tax
When selling a property, the seller may be liable for capital gains tax on the profit. The standard rate is 25% on the real gain (after adjusting for inflation). Israeli residents selling their single residential property may be exempt. Foreign sellers are subject to a withholding of 15% of the sale price at source, which is then reconciled with the actual tax owed.
3 Arnona — Municipal Tax
Every property in Israel is subject to Arnona, a bi-monthly municipal tax. Rates vary significantly between cities and are calculated per square meter. Residents may qualify for discounts (new immigrants, elderly, low income). For investors, Arnona is an ongoing expense to factor into rental yield calculations.
4 VAT on New Properties
New properties purchased directly from a developer include 17% VAT (Ma'am) in the price. This is included in the listed price and also factored into the purchase tax calculation. Resale properties between private individuals are not subject to VAT.
This article is adapted from content originally published on
immobilier.co.il
— Israel's leading real estate portal since 2004.
Read the original article
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