As of 1 January 2014, the new land appreciation tax was put in force by the Israel Tax Authority, and by January 2022, a new acquisition tax came into effect. The subsequent increase of purchase tax now requires multiple homeowners in Israel as well as foreign investors capital gains tax on residential property investments. 

Acquisition Tax in Israel

• Purchasers, whether a local Israeli or a foreign investor, is obligated to pay acquisition tax. There is however a difference in rate payments based on citizenship and other factors. 
• The main categories for real estate taxation include Israeli single residential property owner, non-Israeli making Aliya single residential property owner, Israeli multiple residential property owner, and an Israeli non-resident property owner. 
• In Israel, single property owner refers to those owning less than 33% of an initial property inside or outside Israel. 
• A multiple homeowner refers to individuals who own more than 33% of a property.
• The rate of purchase tax in Israel is progressive and may fall between 3.5% and 10%. The accurate rate will depend on factors, including the nature of real estate, land, apartment, or any other Israel real estate property. 

Estimated Acquisition Tax Bracket

Israeli Single Homeowner

• Property value of NIS 0 to 1,805,545 is assessed 0% purchase tax. 
• Property value of NIS 1,805,545 to 2,141,605 is subject to 3.5% purchase tax.
• Property value of  NIS 2,141,605 to 5,526,070 is subject to 5% purchase tax.
• Property value of NIS 5,526,070 to 18,416,900 is subject to 8% purchase tax.
• Property value above NIS 18,416,900 is subject to 10% purchase tax.

Israeli Multiple Homeowner and Non-Israeli Resident

• Property value of 0 to 5,525,070 is subject to 8% purchase tax. 
• Property value above 5,525,070  is subject to 10% purchase tax. 

Non-Israeli Making Aliya

• Property value of 0 to 1,902945 is subject to 0.5% purchase tax. 
• Property value above 1,902,945 is subject to 5% purchase tax.

Land Appreciation Tax Reform in Israel for 2022 to 2023

• Sellers are required to pay land appreciation tax, referring to capital gains of residential property ownership. 
• Before 1 January 2014, Section 49b(1), anyone, regardless of citizenship, can be exempted from capital gains tax on the sale of residential property as stated by law every four years. This is applicable regardless of the number of residential properties owner or duration of ownership. 
• According to Section 49b(2), it allows all single residential property owners exemption from capital gains tax every eighteen months as long as the owner did not own or inherit more than one apartment four years before actual sale. 

Israel Arrangements Law

The Arrangements Law pushed for tax reforms under Amendment 76 Real Estate Taxation Law that eliminated Sections 49b(1) and modified 49b(2), which made a significant impact among luxury residential property owners. This law was valid from 1 January 2014 to 2022. 

Section 49b(2)

• Land appreciation tax exemption is valid on the first NIS 4,495,00 of the property sale price. 
• Non-Israeli citizens are not eligible for capital gains tax exemption. 
• Single property owners or non-Israeli citizens making Aliya may claim capital gains tax exemption every 18 months regardless of previous ownerships.
• A single property owner must at least hold ownership of a property for at least 18 months to become eligible for exemption. 
• An Israeli single residential property owner may use capital gains tax exemption with the ownership of at least 33% or less to the property being sold. 
• Property inheritance will not affect single residential property owners claim for capital gains tax exemption on the property owned. 

Section 48b(1)

• From 1 January 2014, a major linear tax reduction can be attained by Israeli citizens. 
• Non-Israeli citizens may not qualify for linear reductions. 
• Within the transitional period, land appreciation taxes may be computed bu dividing the capital gain value of a property at the point of sale by the number of years a property was owned. This can be done by subtracting the capital gain prior to 1 January 2014, and taxing only capital gain starting 1 January 2014 to the date of sale. 
• Any capital gain before 1 January 2014 will be exempt, thus benefiting the owner to sell as soon as possible. 

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This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.