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Buying Israeli Property Through a Company or Trust

Q: Can a foreign company own an apartment in Israel?

Yes, once it is registered as a foreign company with the Israeli Registrar of Companies and has an Israeli address for service. It is then registered as owner at the Land Registry like any other owner.

Q: Is holding through a company better for tax?

For a residential apartment it usually is not, because individual reliefs on rent and on sale are lost and profits are taxed twice. The answer depends on your facts and home-country rules, so get specific advice before deciding.

Q: What is a real estate association?

It is a company whose assets are mainly Israeli real estate. The Real Estate Taxation Law treats a transfer of its shares as if the land itself were transferred, so purchase tax and land appreciation tax can apply.

Corporate documents beside a property deed in Israel

A foreign buyer can purchase an Israeli apartment in their own name, through an Israeli or foreign company, or through a trust arrangement. The structure changes who is registered at the Land Registry, which purchase tax rules apply, how rent and a later sale are taxed and what ongoing compliance is needed. In general, Israeli law gives individual owners of residential property several reliefs that a company does not get, so a corporate structure must earn its place through liability, inheritance or home-country reasons rather than Israeli tax savings. This page sets out what changes, without figures, so you can have an informed conversation with your advisers.

Registration at the Land Registry

Under the Land Law 5729-1969, the registered owner is the entity named in the deed. An Israeli company registers in its own name using its company number. A foreign company must first be registered with the Israeli Registrar of Companies as a foreign company before it can be registered as owner of land, and it needs an Israeli representative for service. A trust is not a legal person under Israeli law; the trustee is registered as owner, and the beneficial interest is documented separately, sometimes with a note in the register. On a personal purchase the buyer is registered under passport number, which must be kept consistent across every document.

Purchase tax

Purchase tax under the Real Estate Taxation Law 5723-1963 is charged in brackets that depend on whether the buyer is an individual acquiring a sole residential apartment, an individual acquiring an additional apartment, or a company. The reduced brackets for a sole apartment are generally available only to Israeli residents, with specific rules for new immigrants, so most foreign individuals already pay the higher brackets; a company pays the higher brackets regardless. The law also treats the transfer of shares in a company whose main assets are Israeli real estate, called a real estate association, as a land transaction, so moving the apartment by selling the company's shares does not escape the tax. Check current brackets with the Israel Tax Authority.

Rental income

An individual landlord can choose between the exemption track, the reduced flat-rate track and the ordinary track for residential rent under the Income Tax Ordinance.
A company cannot use the individual exemption or the reduced flat-rate track. It pays company tax on net rental income and the shareholder is taxed again on dividends when profits are distributed.
A company must keep books, file annual financial statements and returns and, in many cases, register for other taxes, which means ongoing accountant fees.
A trust is taxed under the trust chapter of the Income Tax Ordinance, which classifies trusts by the residency of the settlor and beneficiaries; the result for a foreign-resident trust holding Israeli real estate needs specific advice.

Sale and land appreciation tax

When the apartment is sold, land appreciation tax under the Real Estate Taxation Law applies to the gain. Individuals may be eligible for exemptions or reduced calculations connected with residential apartments, most of which are limited to Israeli residents in any case. A company is taxed on the gain at the company level, and distributing the proceeds to shareholders is a further taxable event. On the other hand, a company can in some cases be sold as a whole, with the apartment inside it, though as noted above the real estate association rules then apply. Model the full chain from sale to money in your hand, not only the Israeli tax at the first step.

Liability, inheritance and home-country reasons

The usual reasons a foreign buyer considers a structure are not Israeli tax. A company can ring-fence liability if the apartment is rented commercially; shares in a company may be easier to pass on or to split among heirs than a registered share of an apartment, and some home-country systems tax or report foreign real estate and foreign companies differently. Against that, the Succession Law 5725-1965 and Israeli probate still apply to shares in an Israeli company, and a foreign company holding Israeli land must keep its own filings current. Mortgage lenders also treat corporate borrowers differently and usually ask for personal guarantees from the shareholders.

Questions to settle before choosing

What is the actual reason for the structure, and does an individual purchase with a will achieve it more simply?
How will the home country tax the company or trust, and does it recognise the Israeli tax paid for credit purposes?
Who will handle the company's Israeli filings each year, and at what cost?
If a mortgage is needed, will the bank lend to the entity and on what guarantees?
What happens on exit: sale of the apartment by the entity, or sale of the entity itself?

Common mistakes

Buying through a company to avoid purchase tax, when the company pays the highest brackets.
Using a foreign company that is never registered with the Israeli Registrar of Companies, which blocks registration at the Land Registry.
Assuming a trust is invisible to the Israeli tax authority; trusts are reportable and taxable under the Income Tax Ordinance.
Ignoring the dividend layer when comparing a company with personal ownership.
Leaving the entity's annual filings undone, which creates penalties and complicates a later sale.

FAQ

Can a foreign company own an apartment in Israel?