1. The Baseline
Foreign residents are still treated as “additional-home” purchasers and therefore pay 8 % purchase tax (Mas Rechisha) on the first ≈₪ 6.06 m and 10 % on any excess. Israelis who own only one dwelling start at 0 %, so careful planning is essential.
2. Lowering Purchase Tax (Mas Rechisha)
- New-Immigrant (“Oleh Chadash”) Status
Under Regulations 12 and 12A of the Purchase-Tax Regulations an oleh enjoys two distinct advantages:
- Immediate Benefit – if the buyer is already recognized as an oleh, the tax brackets shrink to 0 %–5 % instead of 8 %–10 %.
- Retroactive Refund – if the buyer pays the higher foreign-resident rate and then officially makes Aliyah within one year before, or up to seven years after, the purchase, they may apply for a refund of the difference plus linkage differentials once the Ministry of Aliyah confirms their status. A similar refund applies if the oleh buys the property through a company whose shares he or she fully owns, provided the application is lodged within the statutory time-limit.
- Two-Contract Structure (Land + Construction)
Buying a plot and signing a separate building contract means purchase tax is imposed only on the land component; the construction contract is subject to VAT but no additional Mas Rechisha. - National-Development Zones
Since 2025, qualifying northern and southern areas receive a temporary purchase-tax discount and accelerated planning approvals. - Company or Trust Holding
An Israeli company pays 6 % flat purchase tax (effectively 5 % after the 1⁄6 VAT credit) and may deduct running costs against rent. Dividends can be shielded by double-tax treaties. - Co-ownership with an Israeli Resident
Splitting title with a resident spouse or relative lets that person’s share be taxed on the 0 %–5 % “single-dwelling” ladder.
3. Cutting Capital-Gains Tax (Mas Shevach)
- Single-Dwelling Exemption Via Affidavit – A foreign owner can still obtain the full exemption if they prove they own no other dwelling anywhere on the date of sale. This requires:
- a notarized affidavit declaring worldwide no-home status, and
- where possible, a certificate from the tax authority or land registry in the country of residence confirming the absence of additional residential property.
Presented together, these documents satisfy the Israel Tax Authority’s evidentiary burden for non-residents.
- Linear-Improved Method – Gains up to 31 Dec 2013 are tax-free; the post-2014 portion is taxed at 25 %.
- Expense Offsets – Renovation costs, legal fees, agent fees and some interest payments reduce the taxable gain – keep all invoices.
4. Optimising Tax on Rental Income
Foreign landlords may choose each tax year between: full exemption up to ₪ 5,654 per month, a flat 10 % on gross, or marginal rates (21–47 %) on net income with deductions. Switching tracks when circumstances change can raise net yield.
5. Ownership Structures
- Israeli Company – 23 % corporate tax; dividends at 25 %/30 %. Retained earnings can be rolled into new deals or refinanced to defer dividend tax.
- Transparent Partnership – income flows directly to partners; each is taxed only on Israeli-source profit.
- No Estate Tax – Israel imposes none, leaving planning to home-country rules.
6. Double-Tax Treaties
Treaties with the US, UK, Canada, Australia and others can reduce Israeli withholding on dividends and ensure foreign-tax credits at home. Obtain a certificate of residency and maintain “substance” if using a holding company.
7. Pre-Purchase Checklist
- Model purchase tax under every structure, including potential retroactive oleh refunds.
- Confirm oleh-eligibility time-line or family co-ownership options.
- Choose a rental-income regime before letting.
- Map treaty benefits with your home-country accountant.
- Engage Israeli legal and tax counsel from the term-sheet stage.
Final Word
With the right mix of oleh-chadash incentives, Regulations 12 & 12A refunds, careful affidavit preparation for Mas Shevach, strategic contract structuring and treaty planning, foreign buyers can cut tens or even hundreds of thousands of shekels from their tax bill while remaining fully compliant.
Mishkan Israel provides turnkey acquisition, legal representation and tax optimization for global buyers. Contact us before you sign to secure the most efficient path from offer to ownership.
