Israeli Purchase Tax for Foreign Residents Explained
Israeli Purchase Tax for Foreign Residents Explained
Every buyer of Israeli real estate must report the purchase to the Israel Tax Authority and pay purchase tax, known in Hebrew as mas rechisha. For Israeli residents buying a single home, the tax is structured to be relatively favorable. Foreign residents, including most Americans who do not live in Israel, are generally assessed under a different and less favorable framework for residential property. There are important nuances for new immigrants, returning residents and people who later change their status. This page explains the concepts in qualitative terms only. It does not state rates or thresholds, which change and depend on your facts, and it is not tax advice.
What Purchase Tax Is
Purchase tax is a one-time tax levied on the buyer when acquiring rights in Israeli real estate, including apartments, houses, land and certain leasehold rights. It is calculated on the value of the rights acquired and must be paid within a short statutory period after the transaction is reported.
The tax is administered by the Land Taxation office of the Israel Tax Authority, known as Misui Mekarkein. Your lawyer files the declaration on your behalf.
Why Residency Matters
Israeli tax law distinguishes between buyers who are Israeli residents and those who are foreign residents. The favorable treatment for a single residential apartment is designed for residents. A US citizen living in the United States is typically treated as a foreign resident for this purpose, even if he or she holds Israeli citizenship.
Residency for tax purposes is a factual test based on where your center of life is. It is not the same as citizenship, and it is not decided by a passport alone.
New Immigrants and Returning Residents
People who make aliyah may be entitled to special treatment on purchase tax for a residential apartment within a defined window around their immigration. Returning residents may also have particular rules.
Some foreign residents who buy and then become Israeli residents within a set period may be able to request a refund of the difference. These rules are technical, so ask an Israeli tax advisor before signing, not after.
Planned date of aliyah or return
Whether the apartment will be your only Israeli home
Other property you own in Israel
Timing of the purchase relative to your move
Reporting and Payment
After signing, your lawyer submits a declaration to the Land Taxation office describing the transaction and your status. The office issues an assessment, and the tax is paid through the government payment system. Late reporting or payment can lead to linkage, interest and penalties.
Payment of purchase tax is a precondition for registering the property in your name, so it cannot be postponed indefinitely.
Planning Before You Sign
The way you structure the purchase can affect purchase tax. Buying jointly, through an entity or as part of a planned move to Israel may lead to different outcomes. Changing the structure after signing is often costly or impossible.
Share your plans openly with your Israeli tax advisor. Information about your residency intentions, family situation and other holdings allows them to give accurate guidance.
Coordinating With Your US CPA
Israeli purchase tax is not usually deductible in the same way as recurring property taxes for US purposes, but it may form part of the cost basis of the property. Your CPA should record it correctly because it will matter when you eventually sell.
Keep the assessment and payment confirmation. They are part of the paper trail your CPA will need.
Frequently asked questions
Do I pay purchase tax if I hold Israeli citizenship
Citizenship alone does not determine the treatment. What usually matters is whether you are an Israeli resident for tax purposes. An Israeli tax advisor can assess your status.
Can I get a refund if I move to Israel later
In certain situations a foreign resident who becomes an Israeli resident within a defined period may request a refund of part of the tax. The conditions are strict and should be checked before you buy.
Who pays purchase tax, the buyer or the seller
By law and custom the buyer pays purchase tax. The contract may confirm this, and your lawyer handles the reporting.
Is purchase tax charged on a new apartment bought from a developer
Yes, purchase tax applies to purchases from developers as well as resales, and it is calculated on the full contract price including certain additions.
Elkayam Group
Our advisers on Rival Street 37, Tel Aviv, speak Hebrew, English and French, and they connect American buyers with the Israeli tax advisors and lawyers who can assess their status properly.
Unsure how purchase tax will apply to you. Speak with our team and we will point you to the right advisors.
+972-53-658-4252 · support@kobielkayamrealestateltd.com · Rival St 37, Tel Aviv