Regular Purchase Tax for Apartments in Israel

In Israel, the purchase tax for a residential apartment depends on whether the buyer owns an existing apartment. If the buyer doesn’t own an apartment (or only owns partial ownership that doesn’t constitute a full ownership – up to 1/3 of a residential property or up to 1/2 if it was inherited), they benefit from a reduced tax structure. As of 2024:

• No tax applies up to a value of NIS 1,978,745.
• A 3.5% tax applies between NIS 1,978,745 and NIS 2,347,040.
• A 5% tax applies between NIS 2,347,040 and NIS 6,055,070.

This lower tax structure also applies to residents who became Israeli citizens within the past two years or returning residents who were abroad for a long time.

Current purchase tax regulations offer a discount to new immigrants (“Oleh” or “Olim”) who buy property within one year before entering Israel and up to seven years after. This property can be a residential apartment for the immigrant’s own use, a business where the immigrant or a close relative works (relative includes spouse, children, parents, spouse of a child, and siblings), or a combination of residential and business property.

“For the Olim’s residence”

According to the regulations, the residential apartment must be used for the immigrant’s residence and courts in Israel often discuss the phrase “for the immigrant’s residence” – whether use for a few months of the year is considered the immigrant’s residence and the like. We have previously written about the rulings on this issue, and you can read it here.

Proposed Changes to Purchase Tax Benefit for Olim

The Ministry of Finance argues that there’s no reason for immigrants who already own an apartment to receive a lower tax rate when buying another one. Therefore, the proposed change limits the benefit to new Olim who don’t currently own a residential apartment in Israel. Additionally, the proposed benefit structure offers a more gradual tax increase:

• Up to NIS 2,500,000: No tax on the exempt portion (NIS 1,978,745 in 2024) and 0.5% tax on the remaining amount.
• Between NIS 2,500,000 and NIS 4,000,000: A flat 0.5% tax on the entire value.
• Above NIS 4,000,000: Tax according to the regular resident rates (no benefit).

Protection for Existing Olim

To protect immigrants who arrived before the regulation change, they can choose whether to use the old or new regulations when buying an apartment. Existing purchases by new immigrants will continue under the old regulations.