Israel has a complex tax system that is constantly changing and improving. Foreign buyers should consult a tax advisor before purchasing real estate here.

Transaction and registration taxes

Real estate purchase tax (mas rechisha) varies and can be as high as 10%, depending on property value. For properties priced at ILS 4.54M ($1.2M) or less the tax is 8% while for more expensive properties the rate is 10%.

Real estate registration fees (tabu) don’t exceed ILS 1,000 (Israeli New Shekel) or $260.

Buyers receive the title deed once 40% of payment has been transferred to the seller and have paid a purchase tax of 15%. For property bought before 7 November 2001, the tax rate is 7.5% and there are tax exemptions for property bought from certified real estate developers.

Ownership and income taxes

There is no unified real estate tax in Israel.

Municipal tax (arnona) depends on the location and floor space and is about ISL 200 ($50) per month.

Rental income tax varies from 31% to 50%.

Rental income tax

Annual income,
ILS
Rates,
%
Under 239,760 31
239,761–501,480 34
501,481–810,720 48
Over 810,720 50

Capital gains and inheritance taxes

There is no inheritance or gift tax in Israel.

Capital gains tax (mas shevach) is paid upon sale of property and is calculated on the difference between purchase and sale price. It is 50% for property values before 7 November 2001, 20% before 31 December 2011 and 25% from then onwards.

Income and corporate taxes

Income tax (mas hachnasa) is paid by tax residents, both sole proprietors and employees. Individuals who spend more than 183 days per year in Israel, and those with a centre of vital interest (permanent residence, family or business) are considered tax residents.

Income tax (2015)

Annual income,
ILS
Rates,
%
Under 63,240 10
63,241–108,000 14
108,001–167,880 21
167,881–239,760 31
239,761–501,480 34
501,481–810,720 48
Over 810,720 50

Tax allowances are available on income tax and are calculated using discount units (nekudot zikui). According to Nalogi.org.il, one discount unit is ILS 178 ($46) per month or ILS 2,136 ($555) per annum. Israeli citizens are entitled to 2.25 discount units allowing them to earn ILS 3,980 (about $1,000) in non-taxable monthly income from employment. New repatriates get additional discount units depending how long they have been in Israel.

Corporate tax is 26.5%.

Disclaimer: the information in the above article is for reference and may be subject to change over time. Persons interested in exact calculations should contact a certified tax specialist in this country before purchasing property.

 
 
Free advice on real estate in Israel
Alexander Hincu
Property Advisor
+44 20 3608 1267
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