Israeli real estate taxPurchase Tax
Understanding the state of mind of the Israeli lawmaker really helps understanding the logic behind this law (see Israeli real estate tax introduction). The law is basically a socially minded law, and the aim is to help lower and middle class families own a home, while taxing the higher income brackets. With that in mind, let's review the law:
The law makes a broad distinction between homes (residential properties) and anything else. Any property that is not a place of residence, such as offices; retail properties; industrial properties and the like, you will be charged 5% of the purchase price as purchase price. Example: If you bought an office for your company in Jerusalem for $250,000, you will pay $12,500 as purchase tax. The purchase value does not affect the percentage, It's a fixed at 5%.
When dealing with buying a place of residence, things get more complicated - yet the picture looks dramatically betterr tax-wise. The figuress listed in the table below are true as of July, 2007 and are updated every 3 months. While they do change, the fluctuations are not dramatic and you can use them to get a fairly good indication of what the Israeli purchase tax is about. Essentially, you are charged at three tax levels: 0%, 3.5% and 5%. Here is how it works:
Table 1
Up to a purchase price of 602,260 NIS, you will not pay any tax at all.
For any sum above 602,260 but below 746,820 NIS, you will pay 3.5%.
Anything higher than that will be charged 5%.
Let's use a real life example to clarify things. You have just bought your dream home in Jerusalem for $450,000. The exchange rate was 4 shekels to the dollar, so you actually payed 1,800,000 NIS. How much will you be charged as purchase tax?
Well, you won't pay anything for the sum up to 602,260 NIS.
For the 144,560 NIS that are between 602,260-746,820 you will pay 3.5% which are: 144,560 X 0.035 = 5059 NIS.
The last part is the 1,053,100NIS that are above 746,820 NIS. For the last section you will pay 1,053,100X0.05=52,659. You total tax expense will look like this:
All this applies to a family that does not own a home in Israel already. If you already own a home in Israel, you pay 3.5% on the sum up to 746,820NIS and 5% on all the rest.
Happily, Olim get a discount. (for an in depth discussion on your rights as olim with regard to real estate, click here). Here is what olim pay:
Purchase price Up to 1,127,190 NIS Higher then 1,127,190 NIS percentage 0.5% 5%
Noam Levy is the founder of Tzor Real Estate Ltd. (https://www.tzor.co.il), which offers a unique buying service for buyers who reside outside of Israel.
{mosComment} {mosForward} {mosDelete} {mosBookmark}
