Understanding Israel's property tax system is essential for international investors. Four main taxes apply at different stages of ownership, and getting them wrong can significantly impact your returns. Here's the complete 2026 breakdown.
Tax 1: Purchase Tax (Mas Rechisha)
Paid once at acquisition. For foreign investors:
- 8% on the first NIS 6,055,070
- 10% on amounts above NIS 6,055,070
- Deadline: Declare within 30 days, pay within 60 days of signing
- No exempt bracket — applies from the first shekel
Example: NIS 3,000,000 apartment = NIS 240,000 in purchase tax (8%)
Tax 2: Annual Property Tax (Arnona)
Municipal tax paid annually — same rate for residents and foreign owners:
- Tel Aviv center: NIS 100–120/sqm/year
- Jerusalem: NIS 60–90/sqm/year
- Beer Sheva: NIS 40–60/sqm/year
Example: 80 sqm apartment in Jerusalem = NIS 5,600–7,200/year
Tax 3: Rental Income Tax
Three options for foreign owners:
- 10% flat rate (most common): Pay 10% of gross monthly rent. No deductions, no annual return.
- Progressive rate (10–50%): Full deductions allowed. Best if expenses are high.
- Exemption: Income under NIS 5,654/month may qualify.
Example: NIS 8,000/month rent × 10% = NIS 9,600/year tax. Net annual income: NIS 86,400.
Tax 4: Capital Gains Tax (Mas Shevach)
Paid when selling — on the real (inflation-adjusted) profit:
- Standard rate: 25% for foreign investors
- High income surtax: +3% if total income > NIS 721,560/year
- Pre-2014 purchases may benefit from the reduced "linear rate"
Example: Buy at NIS 2M, sell at NIS 2.6M (+30%), taxable gain ~NIS 530K (after deductions), tax = ~NIS 132,500
VAT on New Construction
18% VAT (since January 2025) applies to new apartments purchased from developers. Usually included in the quoted price — always confirm. Olim are VAT-exempt on first purchase within 7 years of aliyah.
Total Tax Cost Summary
For a NIS 3,000,000 apartment — full 5-year investment cycle:
- Purchase tax at acquisition: NIS 240,000
- Annual Arnona (5 years): NIS 40,000
- Rental tax at 10% (5 years): NIS 48,000
- Capital gains at sale (25%): ~NIS 130,000
- Total tax over 5-year cycle: ~NIS 458,000
- Gross appreciation (30%): NIS 900,000
- Net after all taxes: ~NIS 442,000
For a comprehensive tax planning guide, see our Tax Guide for Foreign Investors 2026.