Taxes in Israel: Purchase tax 2022
In accordance with the Tenant Housing Services Index, the purchase tax brackets in Israel were recently updated on January 16th. As per the law, these brackets undergo annual updates, typically taking effect in the middle of January.
The revised tax brackets apply to both the exemption for single residential apartments and investment properties. However, it's important to note that these brackets do not apply to commercial and agricultural properties and lots, as the tax rate for such properties remains fixed at 6%.
It's crucial to keep in mind that tax exemption applies only to residents. This means that if you are a non-Israeli or a citizen residing abroad, you are not eligible for the exemption and will be subject to taxation based on the additional apartment bracket. However, if you are planning to make Aliyah (immigrate to Israel) or return to the country, you may qualify for a tax refund.
Here are the updated tax brackets for the purchase of a single residential apartment, applicable from January 16th until January 15th, 2023:
No tax will be paid on the portion of the property's value up to NIS 1,805,545 (formerly NIS 1,747,865).
A tax rate of 3.5% applies to the portion of the value between NIS 1,805,545 and NIS 2,141,605.
For the portion of the value between NIS 2,141,605 and NIS 5,525,070, a tax rate of 5% is levied.
The tax rate increases to 8% for the portion of the value between NIS 5,525,070 and NIS 18,416,900.
Any value exceeding NIS 18,416,900 incurs a tax rate of 10%.
Let's consider a couple of examples to illustrate the application of these tax brackets:
Example 1: Purchase of a single residential apartment for NIS 1,500,000: No tax will be paid since the apartment's cost falls below the tax bracket, making the buyer eligible for a full exemption.
Example 2: Purchase of a single residential apartment for NIS 2,500,000:
No tax will be paid on the portion up to NIS 1,805,545.
A tax of NIS 11,762 (3.5% of 2141605 – 1805454 = 336060) will be paid on the portion between NIS 1,805,545 and NIS 2,141,605.
A tax of NIS 17,920 (5% of 2500000 – 2141605 = 358395) will be paid on the portion between NIS 2,141,605 and NIS 2,500,000. The total tax will amount to NIS 29,682 (11762+17920), compared to NIS 32,726 for purchases made between January 16th, 2021, and January 15th, 2022.
For the purchase of additional (investment) apartments, the tax brackets are as follows:
An 8% tax rate applies to the portion of the value up to NIS 5,525,070.
Any value exceeding NIS 5,525,070 incurs a tax rate of 10%.
Example 3: Purchase of an additional apartment for NIS 2,500,000: The purchase tax will amount to NIS 200,000.
It's worth noting that New Olim (new immigrants) may be eligible for a purchase tax discount on properties they acquire in Israel during the period from one year before their Aliyah to seven years after. However, this discount is generally applicable to properties valued at over USD 1.5 million (approximately).
Staying informed about the updated purchase tax brackets is essential for individuals involved in real estate transactions in Israel. Understanding the applicable tax rates and exemptions can help facilitate informed decision-making and ensure compliance with the latest regulations.
Feel free to use this purchase tax calculator we made just for you.