Mas Rechisha (purchase tax) is paid by the buyer within 60 days of purchase. Rates depend on whether you're an Israeli resident, what type of property you're buying, and the property's value.
| Property Value (NIS) | Tax Rate |
|---|---|
| Up to โช6,055,070 | 8% |
| Above โช6,055,070 | 10% |
Note: Rates updated annually for inflation. Above is approximate for 2025.
Rates start at 0% and rise progressively up to 10% โ significantly lower than foreign buyer rates.
Israel offers foreign owners two ways to be taxed on rental income. Choosing the right one can save thousands per year.
Best for: Properties with no mortgage, low maintenance, owners who want simplicity.
Best for: Properties with mortgages, higher maintenance, sophisticated owners. Often results in zero or near-zero Israeli tax in early years due to mortgage interest deduction.
For Israeli residents (not foreign), there's a partial exemption for rental income up to โช5,654/month (2025). Not available to foreign owners.
Mas Shevach is Israel's capital gains tax on real estate sales.
The 25% rate applies to the "shevach" (gain) โ calculated as:
Sale Price โ Indexed Cost โ Allowable Improvements โ Selling Costs = Shevach
The original cost is adjusted for inflation using the Israeli CPI. Mortgage interest is NOT deductible from the gain (it's deducted during the rental period instead).
Foreign owners typically cannot use these exemptions (since the property isn't their primary residence). However, certain exemptions exist for inheritance and gift transfers.
The 10-year Aliyah exemption does not exempt Israeli real estate. The property is in Israel, so any gain is Israeli-source. Selling Israeli property during your exemption period is still taxable in Israel.
If you're a US person, your Israeli property creates US obligations regardless of Israeli rules:
The biggest mistake we see: Americans paying full Israeli tax AND full US tax on the same rental income because they (or their CPA) didn't claim the Foreign Tax Credit properly. We coordinate with US CPAs to ensure you don't pay double.
A group purchase is a uniquely Israeli structure where 10-200+ buyers pool money to buy land and build their own apartments โ saving 15-25% compared to buying from a developer.
For Americans, group purchasing creates additional complexity:
We've handled group purchase transactions for American members totaling over $30M. The tax savings of group purchasing are real โ but only if structured correctly from day one.
Structure your purchase optimally โ Israeli vs US LLC, individual vs trust, financing approach. Save tens of thousands by getting it right upfront.
Choose your track (10% flat or marginal), prepare and file annual Israeli tax returns, coordinate Foreign Tax Credit with your US CPA.
Calculate gain on sale, identify all deductions and exemptions, file mandatory return within 50 days, minimize tax legally.
Full advisory for Americans joining group purchases โ trust review, US reporting setup, US tax coordination throughout the build.
Receiving Israeli property through inheritance creates immediate Israeli filings and US Form 3520 reporting. We handle both.
Israel doesn't have a direct equivalent of US Section 1031, but several structures can defer tax on Israeli property exchanges. We design and execute them.