Introduction
Owning and reselling real estate in Israel involves specific tax obligations that differ from those applicable at the time of purchase. These fiscal aspects must be anticipated as part of any real estate project, as they directly affect long-term costs and potential returns. After addressing the legal framework and purchase process, taxation during ownership and resale represents a key stage in understanding real estate investment in Israel.
Taxation during the ownership period
Owning real estate in Israel gives rise to recurring tax obligations, regardless of any transaction.
Municipal property tax (Arnona)
Arnona is a municipal tax payable by the property holder. Its amount depends on factors such as the property’s location, surface area and use, according to rates set by local authorities.
Other recurring charges
Depending on the property, additional charges may apply, including local levies or costs related to condominium management.
Taxation upon resale of real estate
The resale of a property in Israel may trigger taxation on the capital gain realised.
Capital gains tax (Mas Shevach)
Mas Shevach is a tax levied on the capital gain generated upon resale of real estate. It is calculated based on the difference between the sale price and the acquisition price, subject to adjustments provided by tax regulations.
Exemptions and tax relief
Certain exemptions or reductions may apply depending on factors such as the holding period, the use of the property or the seller’s status, in accordance with applicable Israeli tax law.
Differences according to the owner’s status
Tax treatment may vary depending on the personal and tax situation of the property owner.
Residents and non-residents
Tax rules applicable during ownership and resale may differ between Israeli residents and non-residents, depending on the legislation in force.
Use of the property
Taxation may also vary depending on whether the property is used as a primary residence or held as an investment.
Importance of tax planning
Understanding applicable taxation allows for effective structuring of a real estate project.
Assessment of long-term profitability
Taking into account taxes related to ownership and resale helps evaluate the real profitability of a real estate investment.
Securing the real estate project
Anticipating tax obligations contributes to securing ownership and preparing for resale in compliance with Israeli regulations.
The key steps of a real estate purchase in Israel
Conclusion
Real estate taxation in Israel extends beyond the purchase phase and applies throughout the ownership period and upon resale. Property tax and capital gains tax must be integrated into any real estate strategy. A comprehensive approach, taking into account legal, transactional and fiscal aspects, allows investors and owners to manage real estate assets in Israel in an informed and structured manner.
Real estate taxation in Israel: purchase taxes