What are the new tax changes in Israel's real estate market? - opinion

• Published date: 21 January 2021
• Date: 21 January 2021
• Publication title: Jerusalem Post, The: Web Edition Articles (Israel)

For the purchase of land, a shop, an office or a building, etc., the purchase tax rate is generally 6% of the purchase price. Under certain conditions, the purchaser may be entitled to a partial refund of the purchase tax paid for the purchase of land.

If the purchase is of a residential home, the purchase tax is calculated according to tax brackets.

The tax is higher or lower depending on the number of residential homes owned by the purchaser's family unit (a family unit is parents and their minor children) and whether or not the purchaser is an Israeli resident.

These tax brackets are updated on the 15th of January each year, the latest being last week. There were also important changes last July – see below.

Until recently, the purchase tax for foreign residents, or Israeli purchasers with more than one apartment, was considerably higher than the purchase tax for Israeli residents purchasing their sole home. Whereas the first tax bracket for an Israeli resident purchasing his sole home started at 0%, the first tax bracket for a foreign resident, or an Israeli purchasing an additional apartment, started at 8%.

In July 2020, in the midst of the COVID-19 crisis, the tax brackets were changed, effectively lowering the tax for foreign residents and for purchasers who are buying additional apartments. The first tax bracket was lowered to 5% and only reaches 8% and beyond in smaller stages than before. Therefore, someone purchasing an additional apartment as an investment, or a foreign resident, in the amount of NIS 2,000,000 would have paid NIS 160,000 purchase tax under the old tax brackets and will now pay NIS 107,053 purchase tax under the new tax brackets.

THERE ARE some exceptions to the definition of "sole apartment" and so it is recommended to consult a real estate tax attorney prior to purchasing a residential home. Other tax ramification should also be checked out and planned in advance.

If a residential property is purchased from a building contractor, but under the sales agreement the contractor is not obligated to complete the interior, but rather to leave it as a shell to be completed by the...