Buy-It In Israel

The Cost of Acquisition: Calculating the Mas Rechisha

Posted on 18. Jan, 2010 by buyitinisrael in General

©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.

Additional Residential Home - Applicable when the individual owns another residential property in Israel.

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.

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 16/1/2010 until 15/1/2011.

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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.