Complete Guide to Property Purchase Tax in Israel (Mas Rechisha)
When purchasing real estate in Israel, buyers must pay a property purchase tax, known in Hebrew as "Mas Rechisha" (מס רכישה). This progressive tax is imposed on the buyer at the time of property acquisition and varies based on several factors including the property value, whether it's a first or additional property, and the buyer's residency status in Israel.
This comprehensive guide will help you understand how property purchase tax works in Israel, current tax rates, exemptions, and how to calculate your potential tax liability.
Table of Contents
Understanding Property Purchase Tax
Property purchase tax in Israel is a progressive tax system administered by the Israel Tax Authority (רשות המסים). Unlike many other countries where transfer taxes are split between buyer and seller, in Israel, the purchase tax is paid entirely by the buyer.
The tax is calculated as a percentage of the property's purchase price or its market value, whichever is higher. The percentage increases with the property value according to predefined brackets.
Key factors that affect your tax rate:
The property's purchase price
Whether you're an Israeli resident
Whether this is your only residential property
Your status as a new immigrant (oleh chadash)
The property's designated use (residential or commercial)
Current Tax Rates
For Israeli Residents Purchasing Their Only Residential Property
Property Value (NIS) Tax Rate 0 - 1,940,125 0% 1,940,126 - 2,295,955 3.5% 2,295,956 - 5,338,290 5% 5,338,291 - 17,794,305 8% Above 17,794,305 10%
For Investment Properties or Additional Residential Properties
Property Value (NIS) Tax Rate 0 - 5,338,290 8% Above 5,338,290 10%
For Foreign Residents
Foreign residents generally pay the same rates as Israeli residents purchasing investment properties (8-10%). However, there are some exceptions for those eligible under the Law of Return.
For Commercial Properties
Property Value (NIS) Tax Rate Any value 6%
Note: These tax brackets are periodically adjusted for inflation. The figures shown are current as of early 2024.
Special Categories and Exemptions
New Immigrants (Olim Chadashim)
New immigrants to Israel enjoy special benefits regarding property purchase tax:
Full exemption on the purchase of one residential apartment up to a certain value
Partial exemption on higher-value properties
These benefits are available for 7 years from the date of immigration to Israel
First-Time Homebuyers
First-time homebuyers who are Israeli residents receive favorable tax rates as shown in the table above, with zero tax on the first portion of the property value.
Disability Exemptions
People with recognized disabilities may be eligible for reduced rates or exemptions based on specific criteria.
Family Transactions
Transfers of property between family members (such as gifts or inheritance) may qualify for reduced rates or exemptions under certain conditions.
Tax Calculation Examples
Example 1: Israeli Resident's First Property
Property value: 2,500,000 NIS
Tax calculation:
First 1,940,125 NIS: 0% = 0 NIS
Next 355,830 NIS (from 1,940,126 to 2,295,955): 3.5% = 12,454 NIS
Remaining 204,045 NIS (from 2,295,956 to 2,500,000): 5% = 10,202 NIS
Total tax: 0 + 12,454 + 10,202 = 22,656 NIS
Example 2: Investment Property
Property value: 3,000,000 NIS
Tax calculation:
Entire amount taxed at 8% = 240,000 NIS
Example 3: Luxury First Property
Property value: 6,000,000 NIS
Tax calculation:
First 1,940,125 NIS: 0% = 0 NIS
Next 355,830 NIS (from 1,940,126 to 2,295,955): 3.5% = 12,454 NIS
Next 3,042,335 NIS (from 2,295,956 to 5,338,290): 5% = 152,117 NIS
Remaining 661,710 NIS (from 5,338,291 to 6,000,000): 8% = 52,937 NIS
Total tax: 0 + 12,454 + 152,117 + 52,937 = 217,508 NIS
Payment Process and Deadlines
Reporting Obligation
The buyer must report the property purchase to the Israel Tax Authority within 30 days of the purchase date by filing Form 7000.
Payment Deadlines
The purchase tax must be paid within 60 days of the purchase date
Late payments incur interest and penalties
The tax authority may place a lien on the property until the tax is paid in full
Payment Methods
Online through the Israel Tax Authority website
Bank transfer
At post office branches
Through your real estate attorney
Property Purchase Tax Calculator
To calculate your property purchase tax, you need to consider:
Property value
Your residency status
Whether this is your only residential property
If you're a new immigrant (oleh chadash)
The calculator below provides a simplified estimation of your potential tax liability. For precise calculations, consult with a tax professional.
How to Use the Manual Calculator:
Determine your buyer category:
Israeli resident buying only residential property
Investment property or additional residential property
Foreign resident
Commercial property
Look up the appropriate tax brackets for your category from the tables above
Calculate the tax for each bracket:
Multiply the amount falling within each bracket by the corresponding tax rate
Sum the results from all brackets
Apply any exemptions or reductions you may be eligible for
Recent Changes and Historical Context
Legislative Changes
The property purchase tax in Israel has undergone several significant changes in recent years:
In 2015, tax rates were increased for investment properties to cool the housing market
In 2020, brackets were adjusted to provide relief for first-time homebuyers
Periodic adjustments for inflation occur approximately every 12-18 months
Market Impact
Higher tax rates on investment properties have had a noticeable impact on the Israeli real estate market:
Reduced the number of investors in the market
Shifted some investment toward commercial properties
Created some cooling effect on property prices in certain segments
Tips for Tax Planning
Strategic Timing
Tax brackets are typically adjusted for inflation at the beginning of each calendar year
Timing your purchase around these adjustments can potentially save money
Family Planning
Consider the tax implications when deciding whose name(s) to register the property under
Family members with no existing properties may qualify for lower rates
New Immigrant Benefits
If you're planning to make aliyah, understanding the timeline for tax benefits can help you plan your property purchase optimally
Professional Consultation
Always consult with a tax professional familiar with Israeli property tax law
The complexity of the system means that professional guidance can often save you money
Frequently Asked Questions
Q: Do I need to pay purchase tax if I receive a property as a gift? A: Yes, generally gift transactions are also subject to purchase tax, though there may be exemptions for family transfers under certain conditions.
Q: Is the purchase tax negotiable? A: No, the tax rates are set by law and are not negotiable. However, the property value assessment may sometimes be contested.
Q: How is the property value determined for tax purposes? A: The tax is calculated based on the higher of the purchase price or the market value as assessed by the tax authority.
Q: Can I appeal if I believe the tax assessment is incorrect? A: Yes, you can appeal to the tax authority if you disagree with their valuation or calculation.
Q: Is the purchase tax deductible for income tax purposes? A: For investment properties, the purchase tax can be added to the cost basis of the property for future capital gains calculations.
Q: What happens if I sell my property shortly after buying it? A: There's no direct impact on the purchase tax already paid, but you may face capital gains tax implications.
Q: Are there any payment plans available for the purchase tax? A: In some cases, the tax authority may approve installment payments, particularly for high-value properties.
Q: How do I prove I'm a first-time homebuyer? A: The tax authority will check their records to verify your property ownership history in Israel.
Disclaimer: This guide is intended for informational purposes only and should not be considered legal or tax advice. Tax rates and regulations are subject to change. Always consult with a qualified tax professional for advice specific to your situation.
Last updated: April 2025