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Ole Hadash acquisition tax
In a nutshell:
- When does it start to pay off?
- Who can benefit?
- What criteria must be met?
The acquisition tax for an Ole Hadash (in the rest of this article "Ole Hadash acquisition tax") is a tax to be paid in Israel when acquiring real estate.
This is Hebrew מס רכישה.
This tax is a one-off charge paid by the buyer when purchasing land or property in Israel.
The acquisition tax is triggered each time there is a change of ownership. This article focuses on מס רכישה - acquisition tax rates in Israel on residential property purchased by an individual.
The amount you actually pay is calculated according to the following criteria:
- Type of property (commercial or residential).
- Property value.
- The buyer's situation (first-time buyer, Oleh hadash, Company, etc.).
There are lower acquisition tax rates for first-time buyers, Olim hadashim and other eligible persons.
However, acquisition tax rates in Israel are higher on a second property, as we'll see later.SEE ALSO: SIMULATE YOUR ACQUISITION TAX LIABILITY
Israeli residential property - Acquisition tax on purchase
The purchase tax on Israeli property is calculated using a system of tax brackets.
This means that the higher the value of the property, the higher the percentage of purchase tax.
However, the value of the property in the lower brackets is always taxed at lower rates, with only the higher amount taxed at the higher rates.
A bit confusing? That's why we've got some examples!
First-time buyer (or purchase of your only residential property)
The acquisition tax rates in Israel for an individual purchasing his first residential property are as follows (until 16/01/2023):
| Purchase value (in NIS) - From | Value - between | Percentage purchase tax |
| 0 | 1,805,545 | 0% |
| 1,805,546 | 2,141,605 | 3.5% |
| 2,141,606 | 5,525,070 | 5% |
| 5,525,071 | 18,416,900 | 8% |
| 18,416,901 | Or +. | 10% |
For example:
Purchase of an individual residential apartment for NIS 2,500,000:
For the part of the value up to NIS 1,805,545 - no tax will be paid
Then, for the part of the value exceeding NIS 1,845,546 and up to NIS 2,141,605, tax will be paid at the rate of 3.5 % = NIS 10,362.
And for the part of the value exceeding NIS 2,141,606 and up to NIS 2,500,000, tax will be paid at the rate of 5 % = NIS 17,920.
The total purchase tax payable will therefore be : 28,282 NIS (0 + 10,362 + 17,920)
Acquisition tax rate for individuals who already own another property.
For an individual who already owns a residential property (as defined by law), purchase tax rates will be higher. So those who don't yet own their own home have a small advantage.
Good to know
in Israel, there is no notion of principal residence.
In fact, if you bought a 2-room studio apartment in the past, which has been rented out for 5 years, and you now want to buy your "main" residence to live in.
Be aware that according to the Israeli tax authorities, your 2nd purchase is considered as a second property in its own right and you will therefore have to pay the purchase tax in Israel with the high percentage rate. Don't hesitate to contact us to find a solution.ALSO READ: Purchase tax for second homes
Ole Hadash acquisition tax - A major advantage
An Oleh hadash can benefit from reduced rates on acquisition tax. But, it must meet the following conditions to be eligible:
- The purchase must be made within 7 years of the date of aliyah.
- Alternatively, he can buy the property in the year preceding his aliyah.
- The reduced purchase tax rates can only be used once for the purchase of a residential property and once for the purchase of a commercial property.
- The property purchased must be for the direct use of the individual (i.e., residential property used as a principal residence and commercial property used for business). So you can't take advantage of it if you intend to rent out the property.
The purchase tax rates for an Ole hadash (until 16/1/2023) are as follows:
| Purchase value (in NIS) - From | Value - between | Percentage purchase tax |
| 0 | 1,902,945 | 0.5% |
| 1,902,946 | Or +. | 5% |
Want to calculate how much acquisition tax you'll have to pay?
Click on the following link to simulate your purchase tax in Israel for the Ole Hadash :Click here to simulate your acquisition tax in Israel
Tips
It can often be more tax-efficient for an Oleh hadash to buy a home in Israel using the tax brackets for buying a first apartment.
This usually occurs when the value of the property is less than NIS 5,000,000. So, if an Ole hadash is considering buying two properties, in order to take full advantage of all their benefits, attention should be paid to the property purchased first.
Do not hesitate to contact us to optimize the tax aspects of your real estate purchase in Israel.
In a nutshell:
The acquisition tax rate for an Ole Hadash in Israel is 0.5% (or 5%, depending on the bracket).
Objective :
Encouraging Olim Hadashim to become owner in Israel
Your questions - our advice
- Does this law apply to gifts of apartments between relatives?
- How many days do we have to pay the acquisition tax in Israel?
- Does a donated apartment count as an apartment in its own right?
- Does my main residence in France count towards the number of apartments I own?
- Do the tax authorities check to see if it really is my principal residence?
The above should not be construed as a recommendation and/or opinion and, in any case, it is recommended to obtain personalized professional advice. We will be happy to be at your disposal for any questions and/or clarifications on this subject and in general.
