Every real estate transaction in Israel gives rise to two principal taxes: purchase tax (mas rechisha), payable by the buyer, and betterment tax (mas shevach), for which the seller may be liable. Both are administered by the Real Estate Taxation division of the Israel Tax Authority.

The amounts depend on each party's personal circumstances; they should therefore be assessed before signing, not after.

Purchase tax: the buyer's tax

Purchase tax is levied in brackets on the value of the property acquired. Brackets and rates are revised periodically; current figures are published on the Tax Authority website and in its official calculator.

Single home or additional home

The decisive question is whether the apartment will be the buyer's sole residence. A sole residence acquired by an Israeli resident benefits from reduced brackets; an additional residence is taxed at higher rates.

Intermediate situations exist, for instance where a buyer undertakes to sell a previous home within a prescribed period. The definition of a "single home" is strictly construed and takes into account property held by a spouse and minor children.

Reduced rates for new immigrants

Olim who purchase between one year before and seven years after aliyah may be entitled to a reduced rate. For those arriving since 15 August 2024, the relief applies to a single home they will occupy, subject to a price cap, and may be granted only once.

Deadlines

The buyer reports the transaction within 30 days and pays the self-assessed tax within 60 days. The transaction date is ordinarily the date of signature of the contract, occasionally earlier, for instance upon signature of a memorandum of understanding.

Betterment tax: the seller's tax

Betterment tax is levied on the real gain, namely the sale price less the purchase price, after indexation and allowable deductions such as certain improvement costs and transaction expenses.

Many sales qualify for full or partial exemption.

The single-home exemption

The seller of a qualifying residential apartment constituting their sole residence may be exempt, subject to cumulative conditions, including:

owning it for at least 18 months before the sale;
owning no more than one home at the time of sale;
a statutory value ceiling, any portion above which is taxable.

Non-residents

A non-resident selling an apartment in Israel may qualify if they own no residence in their country of residence, upon production of a certificate from that country's tax authority.

Inherited homes

An heir selling an inherited apartment may be exempt if the deceased owned a single residence and would have been exempt on its sale. The claim is submitted together with the succession or probate order.

Not to be confused: the betterment levy

The betterment levy (hetel hashbacha) is a distinct charge payable to the local planning committee where a zoning plan has enhanced the value of the property. It, too, should be verified before any sale.

Common mistakes

Signing before the purchase tax has been estimated.
Assuming single-home status without verifying a spouse's property or a partial interest held elsewhere.
Missing the reporting deadline, which attracts penalties and delays registration.
Failing to retain receipts for deductible expenses.

The lawyer's role

Estimates the purchase tax in advance and verifies eligibility for reductions.
Assesses whether a betterment tax exemption is available, and on what conditions.
Files the declarations on time and follows up on the assessment.

This information is general in nature. Exact amounts depend on your circumstances and on the Tax Authority's current figures.

Purchase Tax and Betterment Tax in Israel: Who Pays, When, and Which Exemptions Apply