Israeli Property Tax for Non-Residents: What to Establish Before You Buy
Purchase tax, appreciation tax, rental income and the betterment levy, the figures, the statutory sources, and where a treaty will not help you
A buyer who is not an Israeli tax resident pays purchase tax under different brackets from those that apply to an Israeli resident, and on a mid-market apartment the difference can reach roughly two hundred thousand shekels. It is worth knowing before you make an offer: sometimes the transaction can be structured differently, and sometimes the difference is a figure to price in.
What follows covers the four tax events in the life of an Israeli property: acquisition, holding, a planning event, disposal. One definitional point first: “foreign resident” turns not on your passport but on the centre-of-life test under the Income Tax Ordinance [New Version], 5721-1961. An Israeli citizen living abroad may be a foreign resident, and the reverse also holds.
Purchase tax: the 8% floor
Purchase tax is imposed on the buyer under section 9 of the Real Estate Taxation (Appreciation and Purchase) Law, 5723-1963 and the regulations made under it, and the brackets are marginal. The controlling rule for a non-resident is short: you do not qualify for the “single dwelling” brackets, so the zero-rated band does not exist for you.
| Purchase price | Foreign resident / additional dwelling | Israeli resident, single dwelling |
|---|---|---|
| Up to ILS 1,978,745 | 8% | 0% |
| ILS 1,978,745 to 2,347,040 | 8% | 3.5% |
| ILS 2,347,040 to 6,055,070 | 8% | 5% |
| ILS 6,055,070 to 20,183,565 | 10% | 8% |
| Above ILS 20,183,565 | 10% | 10% |
Source: Real Estate Taxation (Appreciation and Purchase) (Purchase Tax) Regulations, 5735-1974; brackets as published by the Israel Tax Authority, frozen without indexation from 16 January 2025 to 15 January 2028.
An apartment at ILS 3,000,000
At ILS 8,000,000 the tax is ILS 678,899: 8% on the first ILS 6,055,070 and 10% on the balance.
The zero-rated band does not apply even where this is your only home anywhere in the world. Any table showing a non-resident scale beginning at 5% or 7% is wrong.
Section 9(c1c)(4)(b): a two-year window
One substantial exception exists. A buyer who was a foreign resident at the date of purchase but becomes an Israeli resident for the first time, or a veteran returning resident within the meaning of section 14(a) of the Income Tax Ordinance, within two years of it, is treated retrospectively as an Israeli resident for purchase tax and may claim the single-dwelling brackets. This needs a refund claim and evidence of when the centre of life moved. For property under construction, the case law tends to count from completion rather than from the contract, which can decide whether the window is open at all.
Appreciation tax on sale
Appreciation tax is charged on the real gain. The rate for an individual is 25%, foreign residents included. The 30% rate applies only to a substantial shareholder disposing of rights in a real estate association.
The linear relief. Where a qualifying residential apartment was acquired before 1 January 2014, the transition date, the gain is apportioned linearly across the holding period: the part attributed to the period up to 31 December 2013 is exempt, and the part from 1 January 2014 onwards is taxed at 25%. This relief is open to foreign residents, and for a long-held property it is usually the most valuable one available.
The residential exemption, and why it is hard to reach. Section 49B(2) requires a foreign-resident seller not to own a dwelling in his country of residence, and section 49A(a) presumes he does until he produces a certificate from that country’s tax authorities.
Not owning property abroad is not enough. The statute calls for a document from a foreign revenue authority saying so, a form some jurisdictions do not issue and others take months to produce. Without it, or evidence the Tax Authority is prepared to accept in its place, the presumption operates and the exemption is lost. Note also the single-dwelling exemption ceiling of ILS 5,008,000 for 2025 to 2027.
Surtax. Section 121B of the Income Tax Ordinance imposes 3% on taxable income above ILS 721,560 in a tax year, and from 1 January 2025 a further 2% on capital income, so the capital element above the threshold carries 5%.
The section 15 advance. This catches buyers out, because it obliges the buyer in respect of tax borne by the seller. Section 15 requires the buyer to withhold an advance against the seller’s appreciation tax: 7.5% of the consideration where the seller acquired the right on or after 7 November 2001, and 15% where earlier. On an ILS 3,000,000 sale at 7.5%, ILS 225,000 goes to the Tax Authority rather than to the seller. It is not a 25% deduction and not a final tax, it is an advance credited against the assessment, and it belongs in the payment schedule. The advance does not always apply. The obligation arises only once more than 40% of the consideration has been paid to the seller, and more than 80% where the seller is a developer. And it does not apply on the sale of a qualifying residential apartment for which the seller has claimed an exemption from appreciation tax, which is the ordinary case on a second-hand apartment. Where it does apply and the buyer nonetheless pays the seller in full, he may find afterwards that he owes the Tax Authority money that has already left his hands.
Sources: sections 9, 15, 48A, 49A, 49B and 73 of the Real Estate Taxation (Appreciation and Purchase) Law, 5723-1963; section 121B of the Income Tax Ordinance [New Version], 5721-1961.
Inheritance, and the sale that follows it
There is no inheritance tax in Israel. The Estate Tax Law, 5709-1949 was repealed in 1981 and has not been re-enacted, so no liability arises on death, no assessment is issued, and heirs are under no pressure to sell in order to fund a tax. Under section 4 of the Real Estate Taxation Law the inheritance itself is not a sale and is not a taxable event.
The taxable event is the sale by the heir, to which the appreciation tax and the exemptions set out above apply. Section 49B(5) is narrower than it is usually taken to be. Three conditions must hold together: the seller is the deceased’s spouse, his descendant, or the spouse of a descendant; the deceased owned one residential apartment and no more before his death; and the deceased would himself have been entitled to the exemption had he sold in his lifetime. A brother or a nephew does not qualify however the will is drawn, and a deceased who left two apartments defeats the exemption on both. Where the deceased was himself a foreign resident, the presumption in section 49A(a) attaches to him, so it is his position, and not the seller’s, that must be certified.
The absence of an Israeli inheritance tax says nothing about the position in the country of residence. Many countries tax the estate of their residents on assets held anywhere in the world, including an asset situated in Israel.
Rental income: three tracks, elected annually
A non-resident is not automatically pushed onto high marginal rates.
| Track | How it works | Position of a foreign resident |
|---|---|---|
| Exemption | Full exemption to ILS 5,654 per month (2026); tapering partial exemption to ILS 11,308, the exemption shrinking by the amount of the excess over the ceiling. | Tested against total residential rents received, not per apartment. The conditions attach to the apartment and to the landlord being an individual; residency is not among them, and section 2 of the exemption law refers simply to an individual, without qualification. The ceiling is tested month by month rather than annually, and it is computed together with the rents of a spouse living with the landlord and of children under eighteen. The tenant must be an individual, or a company approved by the Tax Authority to house its employees; a letting to a company for its staff falls outside the exemption. Points that bear on a landlord abroad: the Tax Authority expects (circular 13/90) the landlord to hold a document signed by the tenant confirming that the apartment serves him for residence only; because Israel collects nothing, the country of residence taxes the rent in full with no foreign tax credit, so the exemption saves Israeli filing and payment, not foreign tax; and on a later sale where no full land appreciation tax exemption applies, depreciation of 2% of the value of the apartment for each year it was let is added to the appreciation. |
| 10% track | 10% of gross rent under section 122 of the Income Tax Ordinance, from the first shekel, no expenses and no depreciation. | Open to a foreign resident as well. The Tax Authority’s guide lists two conditions only: the apartment is used for residence in Israel, and the rental income is not business income under section 2(1). The landlord’s residency is not among them. The charge is 10% of gross receipts, with no deduction for expenses or depreciation and no offset, credit or exemption. The tax must be reported and paid within 30 days of the end of the tax year, and later payment carries interest and linkage. Whichever track applies, a business tenant may still be obliged to withhold 35% from each payment, and moving the rent out of Israel has to be arranged in advance: see rent paid to a foreign resident. On a later sale, the depreciation that could have been claimed is added to the sale price for land appreciation tax, even though it was never claimed. Usually the simplest and cheapest route above nominal rent. The country of residence normally credits Israeli tax only up to its own tax on the net income, so where financing costs are high part of the 10% is not recovered. |
| Marginal rates | Scale rates with expenses and depreciation deductible. Income not from personal exertion starts at 31%. | Deductible expenses include interest on a loan that financed the purchase, running costs and depreciation of 2% a year of the value of the apartment. The route requires opening a file and filing an annual return. A foreign resident is not entitled to credit points, so the first bracket of 31% is an effective rate. From age 60 the scale starts at 10%, which can make this competitive where costs are high. |
Sources: Income Tax Law (Exemption from Tax on Income from Rental of Residential Apartment), 5750-1990, ceiling as adjusted for 2026 and published by the Israel Tax Authority; sections 121 and 122 of the Income Tax Ordinance.
Commercial property is different: no exemption, no 10% track, and VAT usually in issue.
The betterment levy: and who owes it
The betterment levy is governed by the Third Schedule to the Planning and Building Law, 5725-1965 and charged at 50% of the betterment, the increase in land value caused by approval of a plan, a relaxation, or permission for non-conforming use. The rate is fixed by statute and does not vary between municipalities.
Points that are routinely misread. The levy is calculated on the planning betterment, not on the transaction price. And the person liable is the owner or lessee, the seller, not the buyer. In most second-hand apartment sales, where no plan has been approved since the last sale, no levy arises.
It falls due on realization of rights: sale, grant of a building permit, or commencement of use. The contract should settle who files the valuation and how payment is secured until clearance for registration issues.
Municipal rates (arnona) are not a percentage of value but a tariff per square metre, set by use classification and by zone under the Arrangements in the State Economy (Legislative Amendments for Achieving Budget Targets) Law, 5753-1992. Liability rests with the occupier.
Double tax treaties: what they do not do
Israel has treaties with roughly 60 countries. Under the OECD model on which they are built, the state where the property is situated retains its full taxing right over income from immovable property and gains on its disposal. Israel collects appreciation tax and tax on rent in full, and purchase tax sits outside the treaties altogether. The treaty operates on the other side: your state of residence gives a credit for Israeli tax paid. You do not pay twice, but you pay at the Israeli rate, and a credit is worth something only if you have a liability at home to set it against.
The 30-day clock
Section 73 of the Real Estate Taxation Law requires both parties to file a declaration with the Real Estate Taxation Director within 30 days of the date of sale, from signature of the agreement, not from handover or payment. Late filing attracts penalties and interest and delays the clearances without which registration cannot complete. A non-resident owner therefore needs standing local representation: deadlines do not adjust for time zones.
Amounts are current as at the date of update and change from time to time.
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Where to go next
- Israeli Real Estate Taxation for Foreign Residents. The routes, thresholds and treaties in full.
- Remote Property Management. Letting and running the property from abroad.