New thresholds for calculating purchase tax
Posted on 22. Feb, 2011 by buyitinisrael in Israel Real Estate
©iStockphoto.com/Beyza Sultan Durna
Mas Rechisha is an acquisition tax, or purchase tax, which is applicable when purchasing real estate in Israel. Once a contract is signed, a self-assessment must be filed with the Israel tax authorities within 50 days and the tax is payable within that period. Late payment can incur fees and penalties. Generally, the Israel real estate lawyer who handles the contract for the property purchase also deals with the issue of Mas Rechisha.
Click here to use our Mas Rechisha Calculator in English.
The amount due depends on numerous factors including status of the purchaser (i.e. resident/tourist/oleh), additional residential properties owned and the price of the property being purchased.
Mas Rechisha on homes in Israel is a graduated (incremental) tax and is calculated as follows*:
Single Residential Home- Applicable when the property purchased is the only residential property owned in Israel. Where a second property is being purchased, individuals are allowed 24 months to sell their original property and retroactively claim a partial rebate on the Mas Rechisha paid.
| Up to 1,135,000 NIS of the purchase price | 0% |
| 1,135,000 NIS-1,610,210 NIS of the purchase price | 3.5% |
| 1,610,210 NIS and above | 5% |
Additional Residential Home - Applicable when the individual owns another residential property in Israel.
| Up to 1,000,000 NIS of the purchase price | 5% |
| 1,000,000 NIS-3,000,000 NIS of the purchase price | 6% |
| 3,000,000 NIS and above | 7% |
New Olim- Applicable to new Olim within the first 7 years of making Aliya. Where a married couple is purchasing a property, it is sufficient for only one of the spouses to have made Aliyah within 7 years.
| Up to 1,463,035 NIS of the purchase price 0.5% | |
| 1,463,035 NIS and above 5% |
This reduced rate for Olim is only granted once. A printout of records from the Interior Ministry will be required in order to substantiate the claim to a discount. In the event of an individual purchasing a residence prior to making Aliyah, the tax must be paid in full within 50 days of contract signing and the discount may be claimed retroactively if the purchase is made within 12 months of making Aliyah. However, as can be seen from the figures above, in some cases an Oleh is actually better off not using his Mas Rechisha rights since he will pay less tax or in some cases no tax if he buys the property as an Israeli. For example, on an apartment priced at 1,025,000 NIS, an Israeli pays no mas rechisha whereas an Oleh pays 5,125 NIS.
Foreign residents buyers pay the same rate for Mas Rechisha as Israeli citizens due to a treaty between Israel and many other countries to prevent double taxation.
*Rates applicable from 21/02/2011.
© Copyright 2011.
The contents of this article are designed to provide the reader with general information and not to serve as legal or other professional advice for a particular transaction. Readers are advised to obtain advice from qualified professionals prior to entering into any transaction.
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4 Responses to “New thresholds for calculating purchase tax”
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Ruth Saffern
09. Mar, 2010
We purchased an apartment in Jerusalem. The lawyer signed the contract on 11/01/2010 & the mas rechisha is due on 12/03/2010. We are being billed at the higher rate. Is there a way to have the tax office reclaculate this tax based on the new tax brackets effective 16/01/2010.
Thank you.
buyitinisrael
09. Mar, 2010
Mazal tov on purchasing a home in Israel! Mas Rechisha is generally due within 50 days of signing the contract and the amount payable is determined by the applicable rate on the date the contract was signed. However, each situation is different and you should check with your lawyer regarding your specific scenario. Good luck – Debbie
Ben
24. Jun, 2010
We live in London UK and have purchased a new apartment which is under construction. We will remain foreign residents, not olim. We would like to send floor tiles and kitchen units for the new apartment. Will we need to pay import duty and vat on these items?
buyitinisrael
24. Jun, 2010
This area is beyond our scope of Israel real estate expertise but I recommend you check with the Customs and VAT department at http://www.finance.gov.il/customs/eng/ . Before importing these products to Israel, you should look into buying tiling and cabinetry in Israel. There is a very wide range of high quality products and finishings and prices are comparable to those in Europe. Good luck!