Israeli Property Tax for Non-Residents
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
David Melnik, Advocate & Notary | Advising clients since 1996
If you are buying an apartment in Israel and you are not an Israeli tax resident, the most consequential number in your budget is one most buyers meet late: purchase tax. On a mid-market apartment the gap between what you pay and what an Israeli buyer pays for the identical property runs to roughly a fifth of a million shekels, not a penalty and not a surprise, but a figure knowable to the shekel before you make an offer.
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 figure is ILS 678,899 to 8% on the first 6,055,070, 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): 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, or a senior returning resident, 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, you need an official document from a foreign revenue authority saying so, a form some jurisdictions do not issue and others take months to produce. Without it 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 a ILS 3,000,000 sale at 7.5%, ILS 225,000 goes to the Tax Authority rather than 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.
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.
Rental income: three tracks, elected annually
The common error is to assume a non-resident is automatically pushed onto high marginal rates. He is not.
| 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. | 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. Two points catch landlords abroad: the exemption applies only where the landlord holds a document signed by the tenant confirming that the apartment serves him for residence only, 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. 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. |
| Marginal rates | Scale rates with expenses and depreciation deductible. Income not from personal exertion starts at 31%. | 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.
Two points 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, with no betterment-generating planning event, no levy arises at all.
It falls due on realisation 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.
On recurring charges, one correction worth making: 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 the purchase tax, the appreciation tax and the tax on rent in full. 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.
Costing the tax on a specific transaction
The firm advises non-resident buyers on the tax exposure before signature, on the statutory filings, and on putting local representation in place.
Enquiries welcome in English or Hebrew.
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.
If you want this looked at on your own facts, write to david@melnik.org.il or see how to contact the office.