What is Purchase Tax?

Purchase tax is a tax levied on the buyer of a right in real property in Israel under the Land Taxation Law (Betterment and Purchase), 1963. The tax is calculated as a percentage of the transaction value and is paid to the Tax Authority within a set period from the signing of the contract.

Purchase Tax Brackets for a Single Apartment

A buyer of a single apartment (who has no other apartment) enjoys significantly reduced tax brackets. The brackets are updated annually according to the index.

Generally, no tax applies to the first portion of the property value (full exemption), and higher portions are taxed at 3.5%, 5%, 8% and 10%.

Important: Before any transaction, it is advisable to check the current brackets with the Tax Authority or an experienced real estate lawyer.

Purchase Tax for an Additional Apartment (Investors)

Someone who buys an additional apartment (who already has at least one) will pay significantly higher purchase tax – from 8% on the first portion up to 10% on the portion above it.

Therefore, advance tax planning is critical in real estate transactions – especially for investors.

Special Cases – Reliefs and Exemptions

  • New immigrants: Entitled to significant purchase tax relief on a first apartment, under certain conditions.
  • Disabled and bereaved families: Partial exemptions under regulations.
  • Sale of existing apartment within 24 months: A buyer who sells their existing apartment within two years of the new purchase – may receive a refund of the purchase tax difference.
  • Purchase from a relative: Transactions between family members may qualify for a one-third reduction in purchase tax.

Common Mistakes

Many buyers are unaware that combination deals, buying a plot for construction, and even receiving an apartment as a gift – all require reporting and payment of purchase tax. Failure to report may lead to fines and proceedings with the Tax Authority.

Why Consult a Lawyer?

An experienced real estate lawyer can help with optimal tax planning, ensure you use all the reliefs and exemptions you are entitled to, and make sure reporting to the authorities is done correctly and on time.

At Adar – Dor we accompany clients through all stages of the transaction, including accurate purchase tax calculation and representation before the Tax Authority when needed.