Since the beginning of the year, the number of people wishing to immigrate to Israel and acquire Israeli citizenship has increased significantly. Various organizations working abroad to facilitate the immigration process to Israel report a hundreds of percent increase in requests for assistance in moving to Israel and obtaining citizenship. Purchasing home ownership is one of the most important steps in moving to Israel, and the tax implications in this regard can be a significant cost.
Like many other countries, Israel imposes taxes not only on the income from the sale of real estate, but also on the purchase itself (purchase tax). This is usually 6% of the cost of the asset, or 8%/10% of the cost of the asset when a foreigner purchases a residential property.
To encourage more people to emigrate, the Minister of Finance has introduced a new tax break that significantly reduces purchase tax rates on residential property transactions involving new immigrants, with a special focus on those who purchase their only residential property in Israel.
Under the newly introduced tax relief, a new immigrant purchasing a single residential property will be exempt from purchase tax on the portion of the property value up to NIS 1,988,090 (as of 2024). For the property value exceeding this amount and up to NIS 6,055,070 (as of 2024), a reduced purchase tax of 0.5% will apply. For any value above NIS 6,055,070, the normal purchase tax rate of 8% will apply. It should be noted that the relief will not be granted if the value of the residential property purchased exceeds NIS 20,183,565 (as of 2024).
Immigrants who purchase an additional home in Israel pay the standard purchase tax rates (8% and 10%) established by law.
An immigrant purchasing commercial real estate pays 0.5% purchase tax up to NIS 1,988,090, with a 5% tax rate being levied on any amount exceeding this.
The reduction in the purchase tax rate applies only to transactions made from one year before the immigrant’s arrival in Israel and up to seven years thereafter, and where the immigrant holds an immigrant visa or immigration certificate in accordance with the Law of Return.
Certain provisions for residential properties and tax relief
However, for residential properties that are under construction at the time of purchase, the new immigrant must move to Israel within three years of the date of purchase to be eligible for the tax relief.
Those who immigrated to Israel before the change in regulations can choose whether to follow the old or the new regulations, depending on their preference.
It should be noted that the Tel Aviv District Court recently addressed the residency conditions that must be met by foreign residents and new immigrants to qualify for tax breaks or exemptions from purchase and capital gains taxes, with each case stemming from different sections of the law. The court’s conclusions were varied and may potentially impact new immigrants.
The authors are tax lawyers at Benjamini & Co.
