Buy-It In Israel

Paying municipal taxes on your home in Israel

Posted on 11. Feb, 2010 by Buy-It In Israel Staff in Miscellaneous

Modi'in Municipality Annual Arnona Bill

When living in a  home in Israel or owning real estate in Israel, anywhere around the country, municipal taxes must be paid on the property.  The so-called ‘Arnona‘ municipal tax is collected on the basis of the size of dwellings, whether residential or commercial, levied by the local authority. However the tax is not uniform but differs from city to city and even within the same city, property owners or tenants could get charged differential rates depending on the neighborhood and type of property and apartment size.

In general on a national basis, the Arnona is calculated at a rate of NIS 35 to NIS 96 per square meter for buildings classified as category ‘A’ and NIS 23 per square meter for buildings classified as category ‘B’. The classification of buildings and neighborhood zoning of cities for the purpose of calculating the municipal tax rate is determined by the local authority of each city and therefore rates can vary significantly from neighborhood to neighborhood. While some municipalities split the city into zones others charge a flat rate per square meter independent of neighborhood or apartment size.

For example, the local authority of Jerusalem splits the city into four zones for the purpose of calculating municipal taxes for residential housing of apartments with a size of up to 120 sqm. and apartments over 120 sqm. In zone A, which includes parts of the areas of the German Colony, Kiryat Shmuel, Rehavia, Mamila, Kiryat Ariyeh, Talpiot, and Ramat Alon, the highest municipal tax rate is charged at NIS 77.76 per sqm. for apartments with a size of up to120 sqm. and NIS 93.85 for apartments with more than 120 sqm. In zone B, which includes parts of the areas of Geula, Gonen, Sha’are Hesed, Nachlaot, Romema and Pizgat Ze’ev, municipal tax rates range from NIS 62.37 per sqm. for apartments of a size of up to NIS 120 sqm. to NIS 85.28 for apartments with more than 120 sqm. In zone C, which includes parts of the areas of Mount Zion, Meah Shearim, Givat Shaul, Kiryat Hayovel and Nahalat Shimon municipal tax rates are fixed at NIS 46.42 per sqm. for properties of up to 120 sqm. and at NIS 65.79 for properties larger than 12 sqm. In Zone D, which includes parts of the neighborhoods of Givat Shaul Bet, Neve Yaacov, and Ein Kerem, municipal tax rates are the lowest ranging from NIS 33.52 per sqm. for apartments of up to 120 sqm. to NIS 53.78 for apartments of more than 120 sqm.

The city of Netanya is divided into three zones for the purpose of calculation of residential municipal taxes. In zone 1, which is the most expensive zone, municipal taxes range from NIS 35 per sqm.to NIS 69.32 depending on the size and type of property. In zone 2, arnona tax charges start at  NIS 32.35 per sqm. to NIS 56.46 and in zone 3 municipal taxes range from NIS 29.56 per sqm. to NIS 40.43.

At the same time if you make use of your space other than residential, ie. if your residential apartment is partly also used as office space, the property will need to be divided into two for the purpose of calculating the municipal tax charges.

There are a number of exemption rules regarding the payment of municipal taxes which are as follows:

1. If you are foreign resident buyer of a holiday home in Israel you should know that municipal taxes will need to be paid throughout the year even if you are not resident in the property. Only in cases where the property is unused and completely empty of furniture and possessions, you are entitled to an exemption from arnona tax payments for a one- time period of six months.
2. If you are second-home buyer and you are renovating an apartment, or your family home, which is completely run-down and therefore uninhabitable you can make a claim for an exemption, which needs to be filed to the city prior to the start date of renovation. Municipal tax exemptions in this case can not be claimed retroactively.
3. If you are renting out an apartment, the tenant is obliged to pay full municipal taxes at all times until the tenancy contract terminates. For example, in cases in which a tenant vacates the rented property and stops paying rent, the tenant remains responsible for paying the tax until the tenancy contract is officially cancelled. At the same time when moving into a new home, you have to make sure that you transfer the Arnona bill to your name to avoid paying for the previous tenant’s debts.
4. New immigrants or olim are entitled to municipal tax benefits in the form of a reduction of 70% to 90% on the tax payments during one of the first two years upon making aliyah. The discount varies slightly from city to city but in the majority of cities there is a municipal tax reduction of 90% for an apartment of up to 100 sqm. for a period of 12 months and needs to be used within the first two years of making aliyah. Immigrants who have either lived in Israel for an extended period before in their lives and are therefore categorized as an “Katin Chozer” upon making aliyah or the category of the “Ezrach Oleh”, immigrants where one parent is Israeli, are not entitled to the benefit.

Reductions are also given to pensioners, soldiers, the disabled, single parent families,  and in some cases for residents with very low salaries. For example pensioners living in Netanya are entitled to a discount of at least 25% on municial tax rates charged for an apartment of up to 100 sqm.

While living in a Moshav, which is a settlement or village governed by an elected council all taxes are paid directly to the local council.

© Copyright 2010.

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