Purchase tax in Israel: Updated thresholds in August 2020

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Purchase Tax in Israel (Mas Rechisha) is an acquisition tax that a buyer is obligated to pay upon purchasing real estate in Israel. Once a contract is signed, a self-assessment must be filed with the Israel tax authorities, and paid in full,  within 60 days.  Late payment may incur interest and penalties. Generally, the real estate attorney who handles the contract for the property purchase deals with the issue of Mas Rechisha.

Purchase Tax in Israel (Mas Rechisha) on residential property is a graduated (incremental) tax. Besides the purchase price of the property, other factors that are considered include the status of the purchaser (i.e. resident/tourist/oleh chadash), and additional properties owned in Israel.

Click here to use our Mas Rechisha Purchase Tax Calculator in English.

Each year in January, Israel Tax Authority publishes the new thresholds for Mas Rechisha (Purchase Tax in Israel) according to the Central Bureau of Statistics Prices of Dwellings Index for the previous year.  On 29/08/2020, as a result of the economic crisis brought on by Covid-19, the Government approved a tax cut for investors — local resident purchasers of more than one home, and foreign-resident buyers.

The current levels are as follows*:

Single Residential Home – Applicable when the property purchased is the only residential property owned in Israel.  Where an additional property is being purchased, individuals are given 18 months to sell their existing property and may retroactively claim a partial rebate on the Mas Rechisha paid.

Up to 1,744,505 NIS of the purchase price 0%
1,744,505- 2,069,205 NIS of the purchase price 3.5%
2,069,205 – 5,338,290 NIS of the purchase price 5%
5,338,290 – 17,794,305 NIS of the purchase price 8%
17,794,305 NIS and above 10%

Additional Residential Home – Applicable when the individual owns more than one residential property in Israel.

Up to 1,292,280 NIS of the purchase price 5%
1,292,280 – 3,876,835 NIS of the purchase price 6%
3,876,835 – 5,338,290 NIS of the purchase price 7%
5,338,290 – 17,794,305 NIS of the purchase price 8%
17,794,305 NIS and above 10%

New Olim – Applicable to new Olim within the first seven 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.  (Time spent in mandatory army duty is not counted in the seven years.)

Up to 1,838,615 NIS of the purchase price  0.5%
1,838,615 NIS and above  5%

This reduced rate for Olim is only granted a) one time for a residential property, or for land that will be developed into a residential property; and b) one time for a property, or land, that will be developed into a place of work. In the event of an individual purchasing a property prior to making Aliyah, the tax must be paid in full within 60 days of contract signing and the discount may be claimed retroactively if the purchase is made within 12 months of making Aliyah and fulfills the required criteria.

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 1,700,000 NIS, an Israeli pays no mas rechisha whereas an Oleh pays 8,500 NIS.

Foreign-resident buyers pay mas rechisha at the same rate as Israeli residents who own more than one home in Israel.

*Rates applicable from 29/08/2020 until 15/01/2021.

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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.

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