Purchase Tax (מס רכישה), otherwise referred to as Stamp Duty Land Tax (SDLT) or Acquisition Tax, is as a one-off tax charge paid by the buyer on the purchase of land or real estate. The purchase tax is triggered each time there is a change in ownership. This article is about מס רכישה – purchase tax rates in Israel on residential property purchased by an individual. How much you actually pay is calculated based on the following criteria:
– Type of property (commercial or residential)
– The value of the property
– The circumstances of the buyer (first-time buyer, Oleh Chadash, Company, etc.)
There are lower rates of purchase tax for first-time buyers, Olim Chadashim, and other eligible persons. However, the purchase tax rates in Israel are higher on a second property.
Purchase Tax on Israeli property is calculated using the Purchase Tax brackets. Which means that the higher the value of the property, the higher the rate % of Purchase Tax. However, the value of the property which falls into the lower brackets are still taxed at lower rates, with only the surplus value taxed at the higher rates. A bit confusing? That is why we have examples!
First time buyer (or buying your only residential property)
The Purchase Tax Rates in Israel for an individual purchasing their first or only residential property are as follows (until 16/01/2023):
Value of the property (in NIS) – from | Value – up to | Rate of 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 | And higher | 10% |
For example:
Purchase of a single residential apartment in the amount of 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 that exceeds NIS 1,845,546 and up to NIS 2,141,605, tax will be paid at the rate of 3.5% = 10,362
- And for the part of the value that exceeds NIS 2,141,606 and up to NIS 2,500,000, tax will be paid at the rate of 5% = 17,920
- So, the total purchase tax payable will be: NIS 28,282 (0 + 10,362+ 17,920)
For an individual that already owns an interest in a residential property (as per the definition of the law), the rates of Purchase tax will be higher. So, people who don’t yet own a property have a little advantage. To find out more, read our article on Purchase Tax for on second properties here.
An Oleh Chadash can benefit from reduced rates of Purchase Tax. But, they meet the following conditions in order to be eligible:
- The purchase must be completed during the 8 year period starting 1-year pre-Aliyah.
- Reduced purchase tax rates can be used only 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 must be used as a home and commercial property used for their business)
The rates of purchase Tax for an Oleh Chadash (until 16/1/2023) are as follows:
Value of the property (in NIS) – from | Value – up to | Rate of Purchase Tax |
0 | 1,902,945 | 0.5% |
1,902,946 | And higher | 5% |
Want to calculate how much מס רכישה you'll have to pay?
The Israeli Tax Authority have built a Purchase Tax calculation simulator just for you. The simulator is in Hebrew and whilst it can be used to provide a general guide to how much stamp duty you’ll have to pay, it’s always recommended that you take professional advice for an accurate result.
Tip
It can often be more tax efficient for an Oleh Chadash to purchase a home in Israel using the Purchase tax brackets of a single property buyer. Usually this occurs when the value of the property is below NIS 5,000,000. So, if an Oleh Chadash is considering buying two properties, in order to make full use of all their benefits attention should be paid to which property is purchased first.
