Understanding Israeli property taxes is essential for accurate investment planning. The tax structure differs significantly from US and European systems, with some unique considerations for foreign buyers.
Purchase Tax (Mas Rechisha)
All property buyers pay purchase tax, but rates differ for Israeli residents, foreign residents, and investors. Foreign buyers typically pay 8% on properties up to approximately 6 million NIS, with higher rates above that threshold. First-time Israeli resident buyers enjoy reduced rates.
Capital Gains Tax
When selling Israeli property, capital gains tax applies to the profit. The standard rate is 25% for individuals. Various exemptions exist, particularly for properties held long-term or as a primary residence (for Israeli residents). Foreign buyers should plan for this tax when calculating investment returns.
Annual Property Tax (Arnona)
Arnona is a municipal tax based on property size and location. It's paid regardless of whether you live in the property. Rates vary significantly between cities and neighborhoods. Budget approximately 1-2% of property value annually.
Tax Treaty Benefits
Israel has tax treaties with both the US and Switzerland that help avoid double taxation. However, you'll still need to report Israeli property ownership and income in your home country. Consult a cross-border tax specialist for personalized guidance.