Purchase tax (mas rechisha) is the tax a buyer pays to the Israel Tax Authority when acquiring a right in real estate. In an apartment deal it can be significant, so it is worth calculating before agreeing on the price.
Who pays purchase tax?
The buyer. The tax is calculated on the value of the acquired right, usually the contract price.
A single apartment or an additional one?
The rates are built in brackets. Someone buying their only residential apartment benefits from an exempt first bracket and lower rates. Someone who already owns an apartment and buys another usually pays higher rates from the first shekel. Special rules apply, for example to someone who sells their previous apartment within a certain period, or who holds a small share in another apartment. The bracket amounts are updated every year, so check the Tax Authority simulator before the deal.
When is it paid?
After signing, a declaration is filed with the Tax Authority, usually by the lawyer, and an assessment is issued. The tax is paid within the period set by law. Late payment carries interest, linkage and penalties, and without proof of payment the apartment cannot be registered in the buyer’s name.
New immigrants and foreign residents
New immigrants (olim) may be entitled to a purchase tax reduction for a certain period around aliyah. The conditions have changed in recent years, so eligibility should be checked before signing. A foreign resident buying in Israel is usually treated as buying an additional apartment. See buying property in Israel for foreign residents and olim.
Common mistakes
- Declaring a single apartment without checking apartments or shares registered to a spouse.
- Not planning the timing of the sale of the previous apartment.
- Ignoring components such as furniture, parking or storage that affect the value.
Purchase tax is separate from capital gains tax, which the seller pays. See capital gains tax on selling an apartment.
Where do you go from here?
Every deal and every property is different, and a small detail in a contract or registration can be worth a lot of money. At Paz Israel & Co. Law Office we support buyers, sellers, landlords and property owners, from the first check to registration at the Land Registry. For more information see our real estate lawyer 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 or a substitute for reviewing your specific circumstances.