Purchase Tax Update 2022
Yesterday, on January 16th, the purchase tax brackets were updated in accordance with the rate of increase in the fixed index (Tenant Housing Services Index). According to the law, real estate tax brackets are updated annually, in the middle of January.
The new tax brackets apply to both the exemption for the single apartment, and for investment apartments. These brackets do not apply on commercial properties, where the tax remains at a fixed 6%.
Keep in mind that tax exemption applies only to residents. It means that whether you are non-Israeli or a citizen who lives abroad, you are not eligible for exemption, and you will be taxed in accordance with the additional apartment bracket. However, if you are about to make aliyah or return to Israel, you may be eligible for a tax refund.
Below are the tax brackets for a purchase of a single residential apartment starting from January 16th until 15.01.2023:
On the part of the value up to NIS 1,805,545 (formerly NIS 1,747,865) – no tax will be paid
On the part of the value between NIS 1,805,545 and NIS 2,141,605 – 3.5%
On the part of the value between NIS 2,141,605 and NIS 5,525,070 – 5%
On the part of the value between NIS 5,525,070 and NIS 18,416,900 – 8%
On the part of the value above NIS 18,416,900 – 10%
For example: Purchase of a single residential apartment (as defined by law), in the amount of NIS 1,500,000:
No tax will be paid since the apartment cost is below the pay bracket and the buyer is eligible for a full exemption.
Another example: Purchase of a single residential apartment, in the amount of NIS 2,500,000:
On the part up to NIS 1,805,545 – no tax will be paid.
On the part between NIS 1,805,454 and 2,141,605, NIS 11,762 will be paid (3.5% of 2141605 – 1805454 = 336060).
On the part between NIS 2,141,605 and 2,500,000, NIS 17,920 will be paid (5% of 2500000 – 2141605 = 358395).
The total tax will be NIS 29,682 (11762+17920), compared to NIS 32,726 for purchases between 16.01.21 and 15.01.22.
Below are the tax brackets for a purchase of an additional (investment) apartment, which is not a single one:
On the part of the value up to NIS 5,525,070 – 8%
On the part of the value above NIS 5,525,070 – 10%
For example: Purchase of an additional apartment, in the amount of NIS 2,500,000:
The purchase tax will be NIS 200,000.
New Olim are entitled to a purchase tax discount for the property they purchased in Israel in the period between one year before their Aliyah and 7 years after. However, in most cases, this discount is useful only for properties over USD 1.5m (approximately).