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Apartment Purchase & Sale Tax Laws for non Israeli Residents


Capital Gains Tax (Mas Shevach) and Property Tax (Mas Rechisha)

You want to buy an apartment in Israel. Before you make this dream come true, and before purchasing an apartment, check carefully the transaction's tax liabilities.

Sellers and buyers be aware! In Israel a real estate purchase by a non-resident may result in significant tax charges.

In this article we will refer to the current legal status of buying and selling apartments by non-Israeli residents in regard to Capital Gains and Property Taxes. We recommend also reading the article: "How Can Foreign Residents Invest in Real Estate in Israel without Paying Taxes?" in our series: "The Ins and Outs of Real Estate in Israel" (found on our website:

This article describes the tax situation for individuals. The tax regulations and liabilities for corporations or partnerships are different.

There are four different tax categories of buyers and sellers regarding real estate taxes in Israel:

  • An Israeli citizen and resident.

  • An Israeli citizen but foreign resident.

  • A Foreign citizen but Israeli resident.

  • A Foreign citizen and foreign resident.


Whether the party is an Israeli or foreign citizen, the Real Estate Tax Reform Law of 2014 rules on full or partial exemptions according to a Residency Test (Mivchan HaToshvut).

Israel Real Estate - Capital Gains Tax (Mas Shevach)

Currently, the Capital Gains Tax is paid by the seller on the increase in real value of the apartment that he/she is selling. The Real Estate Tax Reform of 2014 cancelled the previous Capital Gains Tax exemption of selling an apartment once every four years.

This former exemption applied to all sellers, including residents and non-residents.This significant change, which implies Real Estate taxation on non-residents, nevertheless allows a foreign resident to benefit from an exemption, but on condition that the foreign resident seller does not possess an apartment in his/her country of residence.

This is not a simple condition. The tax authorities in the country provide the necessary documentation for the Israel

Tax Authority. Sometimes, even after one obtains the required approval and is exempted from Israeli real estate tax he/she still may be taxed in his/her country of residence. To avoid possible tax implications, it is recommended that you consult with a tax attorney who specializes in real estate before you make your real estate transaction.


Currently, Israeli citizens can be exempted from paying the Capital Gains tax upon selling their apartment contingent on fulfilling at least all three main conditions listed below:

  • The seller owns only one apartment,

  • The seller has owned the apartment for at least eighteen months before selling, and

  • The seller can be exempted only once every eighteen months.


The tax rate for the Capital Gains Tax is 25% of the real increase in the value of the apartment. The real increase is calculated as the difference between the property's value when it is sold and the value at the time when it was bought (linked to the inflation index). This increased real value is charged a 25% Capital Gains Tax.

Adding another layer of considerations to the already complicated conditions partially described above, the 2014 Tax Reform Law also sets a transition period for the full implementation of the law. Accordingly, the seller of up to two apartments that are sold between 1.1.14 and 12.31.17 would be charged a "linear tax".

What is a linear tax and how is it calculated?

Sales of up to two apartments are exempt from Capital Gains tax for the period up to 1.1.2014 while taxed for the period after 1.1.14. For example, if the apartment was owned by the seller for ten years, eight years before 1.1.2014 and two years after, the total sum of the capital gains tax will be calculated proportionally to the period after 1.1.14, i.e. the seller will pay tax only on two out of the ten years of ownership and will be exempt from paying the tax on the period before 1.1.14.

For illustration, consider an example of a foreign resident who purchased an apartment in January 2000 for 800,000 ₪ and sold this apartment in January 2016 for 1,600,000 ₪. This means that, on average, the value of the apartment increased by 50,000 ₪ for every year of ownership (note: in this example the purchase price is not linked to the index). As we discussed above, in this case there is no tax on the capital gains for the apartment's increased value up until 1.1.14 and only the increased value after 1.1.14 will be taxed. In the above example, the real value increase for two years after 1.1.14 was 100,000 ₪ and the capital gains tax applies only on this amount (25%*100,000 ₪ = 25,000₪).

Property Tax (Mas Rechisha)

In distinction from the Capital Gains Tax that is described above, Property Tax in Israel is paid by the buyer of real estate. The rate of this tax depends on whether the buyer only owns one real estate asset in Israel. A buyer who does not own other real estate in Israel can often be fully exempted or at least partially exempted from paying Property Tax depending on the property price. However, if one purchases a second apartment or more the Property Tax is charged without any exemptions..

Prior to the Real Estate Tax Reform in 2014, Israeli and foreign residents enjoyed the partial and full exemptions if they owned only one apartment in Israel. As of 1.1.14 this changed. One who is not an Israeli Resident (whether an Israeli or foreign citizen) will be required to pay Property Tax at the regular rate without any exemptions, even if this is the buyer's only home in Israel.

Nevertheless, the law allowed two exemptions to the Property Tax if the foreign citizen:

  1. Lives in Israel and is an Israeli resident, or

  2. Immigrates to Israel within two years of buying the apartment.

When a foreign citizen who is an Israeli resident purchased his/her first apartment in Israel, this person is entitled to receive a partial or full exemption according to the revised tax law. Residency is determined according to where the "center of the person's life is".

The foreign buyer must prove that his/her center of life is in Israel in order to benefit from the exemption. For this purpose, one can use the assumption that anyone who lives

in Israel for more than half a year (a minimum of 183 days a year) is considered that the center of his/her life is in Israel. The tax authorities might not initially accept this assumption and may require additional evidence to prove that this is indeed true (such as proofs of paying taxes in Israel, children's educational institutions, employment, permanent residence etc.).

Property Tax rate for a non-resident

The Property Tax rates for non-residents on residential apartments are listed in the chart below. Property tax on buying an apartment by a non-resident is progressive, i.e. the tax rate is based on the price of the apartment, the higher the apartment price the higher the tax rate will be.

Current (May 2018) Property Tax rates for non-residents:

On the value of up to 5,095,570 ILS - 8%

On the value of above 5,095,570 ILS - 10%


For example, if a non-resident bought an apartment for 1,500,000 ILS, this buyer is will be taxed 8%, which is equal to 120,000 ₪. On the other hand, an Israel resident who does not own another apartment will be exempt from this tax altogether.

However, because of intricacies and continual revisions in real estate tax rates and legislation, you should consult an attorney who is an expert in real estate taxation before the sale or purchase of an apartment, in order to determine the actual tax charges.


Warning: This information is not intended to constitute legal advice and should not be relied upon in lieu of consultation with the appropriate legal advisors.


Please refer to other articles in our series: "The Ins and Outs of Real Estate in Israel" for non-Israelis on


All rights reserved, Copyright © 2018 Yaacov Epstein Adv.

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