What is the acquisition tax rate in Israel?
The State of Israel has decided to encourage investors to reinvest in the residential real estate sector by lowering the acquisition tax in Israel for the second apartment.
Since 2015, the amount of acquisition tax for the purchase of a second residential property was taxed from 8% up to a purchase value of just over 5 Million Shekels, then 10% above this amount.
The government has decided to lower the percentages to boost the real estate market.
The tax was designed to drive investors out of Israel's residential property sector, to curb the rise in prices.
It was also intended to encourage investors to invest in the Israeli stock market. The problem is that the taxation of stock market income has not been changed. Taxation is 25% in most cases, which is very high compared with the maximum tax of 10% on property income in Israel.ALSO READ: 10% tax on property income in Israel - you can pay a lot less!
Catastrophic consequences for the Israeli market?
The direct consequence was that residential property prices stagnated for the most part. This was the intention, but it led to an unforeseen cascade of events:
- Investors have stopped buying residential property and are instead investing in commercial property in Israel.
- Or simply to stop investing in the Israeli market. (investment in the USA and Eastern Europe).
- Drastic drop in real estate purchases in Israel.
- Lower tax revenues from acquisition and capital gains taxes.ALSO READ: Commercial premises in Israel - Is it better to invest in a SCI or in your own name?
The aim, we remind you, was to bring down the price of residential property to enable young people to buy their own home.
But young people are generally unable to buy residential property at current prices.
The problem is that the 25% down payment is often an obstacle. Bringing in 500,000 Nis for a 4-room apartment in Jerusalem costing 2 million shekels is simply almost impossible for a young couple.
You need to put aside 3,000 Nis a month for 14 years to reach this amount.
For many, this is very complicated, considering that these young people also have to pay their rent and support their families during the same period.
CoronaVirus reverses course
The government changed and the CoronaVirus crisis in Israel prompted the State of Israel to change its policy regarding investors in Israel. Young people were unable to buy their own homes, and the state coffers were in dire need of replenishment.
The Israeli tax authorities have therefore decided to lower the acquisition tax in Israel for investors from July 29, 2020.Purchase tax in Israel - Online simulation.
The table below shows the new amounts:
(the amount of the tax is calculated in stages)
|Property value (in Nis) - from||Value - up to||Acquisition tax|
Your questions - Dray & Dray advice
- - Will residential property prices in Israel soar again thanks to this reform?
- - Will rental prices be able to keep pace with the expected rise?
- - You are an investor - Do you know that SCIs exist in Israel?
- - Is now the best time to buy residential property as an investment in Israel? Has the current crisis really brought prices down?
- - Is there (still) an advantage to buying as a company in Israel? Real estate holding companies have never been so popular.