The acquisition tax

Before buying your dream home in Israel, you must know about the tax implications of such a purchase.

Your purchase in Israel is subject to an acquisition tax. Several tax reforms caused a sharp decrease of this tax.

New immigrants are entitled to a reduced rate:

• For part of price not exceeding 1,463,035 shekels, the tax rate is 0.5%.
• For part of price exceeding 1,463,035 shekels, a 5% rate is applicable.

For example, the tax acquisition to be paid on the purchase of a 1,000,000 shekels home will amount to 5,000 shekels.

These rates apply to the following transactions:

• The purchase of an apartment for effective dwelling of the new immigrant or mixed use (dwelling and professional activity).
• The purchase of offices or professional oriented premises, provided the new immigrant or its close relatives work in such premises.
• The purchase of a plot of land in order to build an apartment or premises, as mentioned.

In order to take advantage of the reduced rate, the purchase must occur not more than one year before making alyah or within seven years after the immigration date.

The purchase of one sole apartment

The purchase of an apartment by an individual when this apartment is the only one owned in Israel is subect to favourable rules. Moreover, a foreign resident is considered taxwise as an Israeli citizen.

The rate of the acquisition tax is gradual:

For example, there is no acquisition tax to be paid for the purchase of an apartment worth 1.000.000 shekels.

Remark: If you bought your apartement as a foreign resident and became a new immigrant during the year following your purchase, you will be entitled to claim refund of part of the tax you paid as a foreign resident.

The purchase of a second apartement

If you already own an apartment in Israel, the purchase of a second apartment will be subject to a higher progressive rate, as follows:

For example, the acquisition tax on the purchase of an apartment worth 1.000.000 shekels amounts to 50,000 shekels.

Refunds may apply if you resell the first apartment within 24 months from the purchase of the second one.

The above rates are valid for acquisitions made between January 16th 2011 and January 15th 2012. Tax rates are adjusted on a yearly basis.

In any case, you have 40 days to file your tax filings after the acquisition.

You may deduct from the purchase price various direct expenses linked to the acquisition (real estate agent commission, legal fees).

Most of the time, the tax filing will be done by your lawyer, who will advise you on the best tax scheme.