How Can Foreign Residents Buy or Sell Real Estate in Israel
without Paying Israeli Taxes?
Israeli real estate tax only applies to real estate transactions in Israel that are made within its pre-1967 boundaries. As such, the taxes that are charged upon selling or purchasing land or apartments in the Judea and Samaria region (Over the "Green Line"), become personal taxes and not real estate taxes. According to certain criterion these personal taxes apply only to Israeli citizens. In other words, foreign citizens who are not Israeli citizens are, in most cases, exempted from paying Israeli personal and real estate taxes on the purchase and sale of real estate in Judea and Samaria. Please note, we are focusing only on Israeli taxes. Please advise with your foreign based attorney or accountant as to what taxes you must pay in your country of origin on this real estate transaction.
How are Israeli citizens defined under Israeli tax law?
Section 16a of the Israeli Real Estate Tax Law defines an Israel citizen as one of the following:
One who is entitled to register or is registered already in the Israeli Ministry of Interior.
An Israeli resident.
One who is entitled to immigrate according to Law of Return (Hok Ha-shvūt) and is living in Judea and Samaria.
Therefore, foreign citizens who are not Israeli citizens or Israeli residents are exempted from paying taxes such as Capital Gain Tax and/or Property Taxes (Mas Shevach and Mas Rechisha) when buying or selling an apartment in Judea and Samaria.
Furthermore, foreign citizens could also be exempted from Income Tax from rental income of apartments located in Judea and Samaria, because Income Taxes apply only to citizens or residents of Israel in this area.
In conclusion, investing in Judea and Samaria can be worthwhile in terms of taxation. As such, if you are a foreign citizen and resident and want to buy an apartment in Efrat, Hashmonaeim, Neve Daniel Etc. (among other attractive communities) you may exempted from Israeli taxes on your purchase. However, every case is different, and you must consult an expert lawyer in property and income tax prior buying or selling in the region of Judea and Samaria (over the Green Line).
Note: This information is not intended to constitute legal advice and should not be relied upon in lieu of consultation with the appropriate legal advisers in your own jurisdiction.
Please refer to other articles in our series: "The Ins and Outs of Real Estate in Israel" for non-Israelis on www.epsteinlaw.co.il.
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