An Israeli resident is taxed on worldwide income, including rent and gains from selling an apartment in Cyprus, Greece or anywhere else. Paying tax abroad does not remove the duty to report in Israel.
Rent from abroad: two tracks
- The 15% track: 15% tax on gross rent, less depreciation only. No expenses are deducted and there is no credit for tax paid abroad.
- The regular track: tax at marginal rates after deducting expenses such as interest, maintenance and depreciation, with a credit for the tax paid in the country where the apartment is located.
Where the foreign tax is significant, the regular track may be cheaper because of the credit. Where it is low, the 15% track is simpler. The comparison is made with an accountant before filing the return.
Selling an apartment abroad
A gain on selling an apartment abroad is subject in Israel to capital gains tax, usually at 25%, with a credit for capital gains tax paid abroad. The exemptions of the Real Estate Taxation Law, such as the single-apartment exemption, apply to apartments in Israel and not to an apartment abroad.
Reporting duties
- A person with rental income from abroad usually has to file an annual return.
- An Israeli resident whose assets abroad exceed a statutory amount (about ₪2 million) must report them.
- Information on foreign bank accounts reaches the Israel Tax Authority under international information-exchange agreements.
The full calculation
When calculating the return on an apartment abroad, deduct the tax in the country where it is located, the tax in Israel, management costs and exchange rates. On taxes in Cyprus itself see Cyprus property taxes.
Where do you go from here?
At Paz Israel & Co. Law Office we accompany real estate investors in Israel, Israelis buying property in Cyprus and foreign investors buying in Israel: checking the property and the seller, negotiating the contract, accompanying you through registration and coordinating with tax advisers. In Cypriot transactions we work in coordination with a local Cypriot advocate. For more information see our real estate investor services page, or contact us to schedule a meeting in Tel Aviv, Jerusalem or Modi’in.
This article provides general information, is correct as of the time of writing, and does not constitute legal or tax advice. Cypriot law is checked in every transaction with a local advocate.