Israeli Real Estate Taxation for Foreign Residents
Buying, holding, letting and selling, the complete guide, updated August 2026
David Melnik, Advocate & Notary | Serving clients since 1996
A foreign resident buying real estate in Israel meets a tax system different from the one that applies to an Israeli resident, and generally a more expensive one. The difference begins at purchase tax, continues through the taxation of rental income, and peaks on sale. Proper planning, done before signing, is often the difference between a viable transaction and one whose return is eroded by tax.
This page covers the four main layers of taxation, and points out where foreign residents actually come unstuck.
Purchase tax
Even if it is their only home anywhere in the world, a foreign resident pays purchase tax at "additional apartment" rates, 8% from the first shekel. There is no 0% bracket. This is the largest single financial difference between an Israeli and a foreign buyer, and it surprises many clients.
| Portion of value | Foreign resident / additional apartment | Israeli resident, single apartment |
|---|---|---|
| Up to ILS 1,978,745 | 8% | 0% |
| ILS 1,978,745 to 2,347,040 | 3.5% | |
| ILS 2,347,040 to 6,055,070 | 5% | |
| ILS 6,055,070 to 20,183,565 | 10% | 8% |
| Above ILS 20,183,565 | 10% |
The amounts are frozen without index-linking from 16 January 2025 to 15 January 2028, under the Arrangements Law for 2025. Source: Real Estate Taxation Execution Instruction 1/2026.
What this means in practice: an apartment at ILS 3,000,000
A purchaser is treated as an Israeli resident for single-apartment bracket purposes if, within two years of the purchase, they become an Israeli resident for the first time or a senior returning resident. The tax is paid in full first; once the condition is met, an application is filed to amend the assessment and obtain a refund.
Two practical points: (a) deadlines have been extended by Tax Authority execution instructions in light of the security situation, anyone close to the deadline should check the extension applicable to them; (b) where the apartment is under construction, recent case law tends to count the period from completion of construction rather than from the off-plan purchase. This distinction is critical in transactions with developers.
A new immigrant benefits from special brackets under Regulation 12A of the Purchase Tax Regulations: 0% up to ILS 1,978,745 and 0.5% up to ILS 6,055,070. On the same ILS 3,000,000 apartment, purchase tax comes to ILS 5,106. The benefit is available once, within a window running from one year before aliyah to seven years after. Anyone already contemplating aliyah should weigh the timing of the purchase against the timing of the move.
Land appreciation tax (mas shevach): on sale
The rate on real appreciation for an individual is 25%, the same as for an Israeli resident. There is no special, higher rate for foreign residents. A 30% rate is relevant only to a material shareholder selling rights in a real estate association, not to a direct sale of an apartment.
The beneficial linear calculation
For a qualifying residential apartment acquired before 1 January 2014, the real appreciation is split linearly by days of holding:
- The portion attributed to the period from acquisition to 31 December 2013, exempt
- The portion attributed to the period from 1 January 2014 to the date of sale, 25%
The beneficial linear calculation is available to foreign residents too, it is not conditional on Israeli residency. For a property held for many years before 2014, this is sometimes the largest single saving in the transaction.
The restrictions that applied during the transition period (2014 to 2017) on the number of apartments eligible for the beneficial calculation expired on 1 January 2018.
The residential apartment exemption for foreign residents
Section 49B(2) of the Real Estate Taxation Law conditions the exemption on the seller being "an Israeli resident or a foreign resident who has no residential apartment in the country in which they are resident".
The law establishes a presumption: a foreign resident is treated as having a residential apartment in their country of residence until they produce a certificate from the tax authorities of that country confirming they do not. The burden is on them, and the default position is denial of the exemption.
The practical difficulty: most tax authorities worldwide do not issue a "certificate of no property". In practice, alternative evidence is accepted, a detailed affidavit, a lease in the country of residence, a local municipal tax bill, a foreign tax return, or a local accountant's certificate. Assembling that evidence should begin before the sale agreement is signed, not after.
The requirement applies equally to a foreign resident heir selling an inherited apartment. That is the Tax Authority's position, and while it is professionally contested, it is the position practitioners face in the field.
Surtax
Above taxable income of ILS 721,560 per year, a 3% surtax applies. From 1 January 2025 a further 2% was added on capital-source income, including land appreciation, so the cumulative addition can reach 5%. The threshold is frozen without index-linking. There is an interpretive dispute as to the scope of the carve-out for the sale of a residential apartment; this should be examined on the facts of the specific transaction.
Advance payment of land appreciation tax: the buyer's obligation
Under Section 15(b)-(d) of the Law, the buyer must withhold from the consideration and remit to the Director of Real Estate Taxation an advance payment against the seller's land appreciation tax:
- 7.5% of the consideration, where the seller acquired the right on or after 7 November 2001, and on purchases from a company
- 15% of the consideration, where the seller acquired before 7 November 2001
Timing: immediately after payment of 40% of the consideration (80% on a purchase from a developer), but not before 30 days have elapsed from the transaction date. Exemptions exist, including on the sale of a qualifying residential apartment that is itself exempt. Special provisions apply to foreign residents, worth clarifying in advance rather than discovering at the payment stage.
Tax on rental income
Residential property: three routes
| Route | Mechanism | Available to foreign residents? |
|---|---|---|
| Exemption route | Full exemption up to ILS 5,654 per month (2026). Partial exemption between ILS 5,654 and 11,308 under a formula. Above that, no exemption | The statutory language refers to "an individual" with no residency condition. To be examined on the facts |
| 10% route Section 122 of the Ordinance |
10% on gross income, with no deduction of expenses, depreciation or offsets. Payment within 30 days of the end of the tax year | Yes, the section imposes no residency condition. The property must be in Israel; the landlord need not be |
| Marginal rate route | Ordinary tax brackets, with deduction of expenses and depreciation | Yes |
Rental income is income not from personal exertion, so the minimum rate on it is 31% (Section 121(b) of the Ordinance). This is a common error: investors assume the first bracket is 10% and discover otherwise.
A significant exception: anyone aged 60 or over is entitled to the brackets applicable to income from personal exertion, that is, starting at 10%. For an older investor this is a dramatic difference, and it can make the marginal route clearly preferable to the 10% route.
Choosing a route is not a technicality. As a rule, the 10% route is preferable where expenses are low; the marginal route is preferable where there is a mortgage, depreciation and significant maintenance costs, or where the landlord is over 60. The calculation is worth running in advance rather than in hindsight.
Commercial property
The exemption route and the 10% route apply to residential apartments only. Income from letting commercial property is taxed at marginal rates, starting at 31% (or from 10% at age 60), with the ability to deduct mortgage interest, depreciation, repairs and maintenance, and professional fees. Where the tenant is a registered business, VAT registration and reporting are generally required.
Betterment levy (heitel hashbacha)
The levy arises under the Third Schedule to the Planning and Building Law. It is 50% of the betterment, that is, of the increase in land value caused by approval of a plan, the grant of a relief, or permission for non-conforming use. It is not a percentage of the purchase or sale price.
- Who is liable: the owner or long-term lessee. In a sale transaction, the seller, not the buyer
- When: on "realisation of rights", sale of the property, issue of a building permit, or commencement of actual use
- In most transactions involving an apartment in an existing building, with no new planning event, there is no betterment levy at all
- Special rates apply in metro station areas, and exemptions exist under Section 19 of the Schedule (for example, extension of a residential apartment up to 140 sq m)
For a foreign buyer, the practical relevance lies mainly in due diligence: confirm with the local planning committee that no levy liability is outstanding, and address in the contract who bears it.
Double taxation treaties
Israel has double taxation treaties with approximately 60 countries, including the United States, the United Kingdom, France, Germany, Canada, Australia (in force from 1 January 2020), South Africa, the Nordic countries and the United Arab Emirates. The authoritative list is published on the Ministry of Finance website.
A common expectation is that the treaty will reduce Israeli tax. Under most treaties, which follow the OECD model, this is not the case for real estate: the country where the property is situated retains full taxing rights over income and capital gains from immovable property.
What the treaty does do is prevent double taxation, by requiring the country of residence to grant a credit for the tax paid in Israel. The real planning question is ensuring the Israeli tax is in fact usable as a credit in the country of residence, and that no timing or characterisation mismatch prevents it. That analysis is done against the specific treaty, not in the abstract.
Certificates and land registry recording
| Certificate | Source | Issued by |
|---|---|---|
| Land appreciation tax certificate (seller) and purchase tax certificate (buyer) | Section 16, Real Estate Taxation Law | Director of Real Estate Taxation |
| Municipal certificate, no municipal tax debt and no betterment levy | Section 324, Municipalities Ordinance | Local authority |
| Certificate of rights (property not registered at the Land Registry) | , | Israel Land Authority / management company |
A declaration to the Real Estate Taxation Authority must be filed within 30 days of signing the transaction. Late filing attracts penalties.
Two status points worth knowing
The tax was enacted in December 2016 and struck down by the Supreme Court sitting as the High Court of Justice in HCJ 10042/16 Kvutinsky v. Knesset on 6 August 2017, on grounds of a defect in the legislative process. The Knesset did not re-enact it. There is no such tax today, and any reference to it as a potential liability is incorrect.
A draft bill from July 2025 proposes conclusive presumptions for residency classification based on weighted day counts, for example, classification as a foreign resident would require no more than 74 days in the tax year and no more than 110 weighted days. As of August 2026 the bill has not become law, and residency is determined by the centre-of-life test together with rebuttable day-count presumptions.
For anyone holding assets in Israel who spends extended periods there, this is worth following, a conclusive presumption could change classification with no ability to rebut it on the facts.
Guidance on Israeli real estate transactions for foreign residents
The gaps between an Israeli and a foreign buyer accumulate into substantial sums, in purchase tax, in the rate applied to rental income, and in the burden of proof on sale. Much of this is manageable, but only if addressed before signing.
The firm advises foreign residents and international investors on Israeli real estate transactions, from due diligence, through purchase and financing structure, to reporting and eventual sale.