The Comprehensive Guide to Israeli Purchase Tax (2026)
Updated: 4 days ago
Exemptions, Reliefs, and Strategic Tax Planning for Residential Property
Note: This article deals with the taxation of real estate intended for residential use only (according to the City Building Plan - TABA). These instructions do not apply to real estate designated for commerce, employment, industry, hotelier use, or any other planning designation. The tax liability for these designations is fundamentally different and does not benefit from the brackets detailed below.
Important Notice: This article should not be seen as legal advice or tax planning. The article reviews the subject of Purchase Tax and does not delve into all the intricacies of the law. You must consult a specialized real estate tax attorney or a tax advisor before taking any action.
Special Notice for Foreign Residents: Under Israeli tax law, non-residents are generally classified by default as "Additional Dwelling" purchasers (Investors), regardless of whether this is their first property in Israel. To qualify for the "Single Dwelling" tax brackets (starting at 0.0%), among other criterias and legal conditions, a foreign resident must provide official certification from the tax authorities in their country of residence proving they do not own a residential property there. Without such proof, the tax rate begins at 8% from the first NIS and may get to 10%.
According to the Real Estate Taxation Regulations, there are several exemptions and reliefs (full or partial) in the payment of Purchase Tax in Israel.
Do you want to know how to save on Purchase Tax? How to avoid paying Purchase Tax?
Who can receive an exemption? How to avoid paying Purchase Tax on an additional apartment (investment property)? And how an appraiser can get you money back even after 4 years? This article is for you.
As of the date of writing this article, these are the Purchase Tax brackets for a Single Residential Dwelling for a purchaser who is an Israeli resident (or a foreign resident presenting a residency permit on the date of purchase):
Tier | Value Range (in ILS) | Tax Rate |
Tier 1 | Up to 1,978,745 ₪ | 0.0% (Full Exemption) |
Tier 2 | 1,978,745 ₪ – 2,347,040 ₪ | 3.5% |
Tier 3 | 2,347,040 ₪ - 6,055,070 ₪ | 5.0% |
Tier 4 | 6,055,070 ₪ - 20,183,565 ₪ | 8.0% |
Tier 5 | Above 20,183,565 ₪ | 10.0% |
Additional Dwelling (Investor / Foreign Resident):
Up to 6,055,070 ₪: 8.0%
Above this amount: 10.0%
The Gap Between an Investment Property and a Single Property: Numeric Demostration with a Property Valued at 2,500,000 ILS
How one property can yield a tax of 20,000.0 ILS or 200,000.0 ILS ? The answer lies in the classification of the purchaser:
"Single Dwelling" Track (Israeli Resident): The state exempts the first two million (0.0%). The tax applies only to the remaining 500,000.0 ILS, and even there at low rates (3.5% and 5.0%). Total Tax: approximately 20,538.0 ILS.
"Additional Dwelling" Track (Investor): The legislator canceled the exemption from the first shekel. The entire value is taxed at 8.0%. Total Tax: 200,000.0 ILS.
"Other Right" Track (Land): A fixed tax of 6.0%. Total Tax: 150,000.0 ILS. Note: Upon meeting conditions regarding the issuance of a permit, a 1.0% refund can be obtained (this benefit, under Section 9(c1a)(1), is conditional on issuing a building permit within 24 months from the purchase date).
How is a 10x multiplier created? In a single dwelling, the state grants an "exemption" on most of the value. In a second dwelling, the legislator set a "deterrent" tax of 8.0% starting from the first shekel. In land, the tax is linear (6.0%) regardless of the number of apartments you own.
Case 1 – One-Third of an Apartment and the Property Count
The law sets thresholds below which ownership of a part of an apartment is not considered ownership of an "apartment" for the purchaser's property count.
Section 9(c1c)(4)(a) of the Real Estate Taxation Law states: For the definition of a "Single Dwelling," an additional apartment will not be taken into account if:
The purchaser's share in it does not exceed 1/3 (one-third).
In an apartment received via inheritance – the purchaser's share does not exceed 1/2 (one-half).
The apartment was leased under Protected Tenancy before January 1, 1997.
Practical meaning: A qualifying ownership share of up to one-third in another residential apartment is generally disregarded when determining whether the purchaser owns a single apartment for purchase-tax purposes. For an apartment received by inheritance, the applicable threshold may be up to one-half. These rules are subject to the statutory conditions and do not, by themselves, establish eligibility for the single-apartment tax brackets.
Case 2 – Transfer Without Consideration (Gift Apartment from a Relative)
An individual receiving a residential apartment from a relative as a gift (transfer without consideration) will pay a reduced Purchase Tax at a rate of 1/3 (one-third) of the regular Purchase Tax.
“20. In the sale of a right in real estate without consideration from an individual to their relative, the Purchase Tax will be one-third of the regular Purchase Tax.”
Who is considered a relative?
Spouse, including one who was a spouse during the six months prior to the sale.
Parent.
Descendant.
Spouse of a descendant.
Brother and sister.
Calculation for half an apartment as a gift: If the owner transferred only part of an apartment (e.g., half), the regular Purchase Tax is calculated first according to the full (total) value of the apartment so that all brackets are activated – then divided by a third (reduced rate) and then divided by 2 because only half was transferred.
Case 3 – Gift to a Spouse Living Together
Furthermore, in a transfer without consideration of a residential apartment between spouses living together in the same apartment (and this is the apartment being gifted), there is a full exemption from Purchase Tax.
“21. Notwithstanding Regulation 20, the sale of a right in real estate in a residential apartment without consideration to a spouse living together with them in the apartment, is exempt from Purchase Tax.”
Meaning: If the spouses live in the apartment – they are entitled to a full exemption; if they do not live in it – Purchase Tax of 1/3 (one-third) of the regular tax will be paid, like any other relative.
Reservation – The Shelmi Ruling:
In cases of spouses purchasing an apartment, the presumption of the family unit can be rebutted by proving property separation (e.g., via a prenuptial agreement and separate bank accounts), allowing one spouse to be considered a single dwelling purchaser even if the other has an apartment from before the marriage.
In Cases 2 and 3 lies the possibility of not paying full Purchase Tax on an additional apartment: One can transfer their current apartment to a relative (e.g., parents) at a reduced tax (1/3) and then purchase the new apartment under the reduced "Single Dwelling" brackets.
Note: The gift transaction must be genuine and not artificial. Pay attention to the "Family Unit" definition. If the child is a minor (under 18), registration in their name does not help for tax purposes, as the law sees parents and minor children as one purchaser.
Case 4 – Improving Dwellers / Alternative Apartment
The law provides reliefs for a seller who commits to selling their current (and only) apartment later while purchasing a new one. The new apartment will be considered an "alternative" to the existing one – and the seller is obligated to sell the existing one within a certain time.
In this method, the Tax Authority "freezes" the Purchase Tax of the new apartment. Section 9(c1a)(2)a(2) defines the relief:
A: A purchaser of a second-hand apartment can sell their existing apartment within 24.0 months from the purchase of the new one.
B: In a purchase from a developer/contractor (new), they can sell the original apartment up to 12.0 months from the day possession is actually delivered.
Note — Delayed Construction and the Melchior Ruling
The applicable deadline for selling a previous apartment depends on the statutory replacement-apartment rules and the facts of the transaction. The Melchior case should not be read as creating a general extension for every purchaser affected by construction delays.
A separate statutory arrangement, introduced by Amendment 93, addresses certain purchasers in stalled purchase groups, subject to specific conditions relating to the delay, the purchaser’s circumstances, and the deadline for selling the relevant rights or apartment.
A purchaser facing a delayed delivery should obtain case-specific advice before assuming that an extended period applies. The relevant statutory provision, the type of transaction, and the circumstances of the delay must be examined separately.
C: Buying Land to Build an Alternative: The Tax Authority's position (2021) is that in a situation where land was purchased to build a dwelling, the period is counted from the completion of construction (Form 4). In certain circumstances, a transaction involving an existing structure may be classified for purchase-tax purposes as the acquisition of land rather than a residential apartment. The classification is fact-specific and may depend on the purchaser’s intention at the time of acquisition, the condition and use of the structure, and the other circumstances of the transaction. It is not determined solely by the purchaser’s preferred tax treatment.
Case 5 – Buying an Apartment and Demolishing the Structure
In some cases, tax planning can be done where purchasing an apartment is treated as purchasing land, specifically when the buyer intends to demolish the existing structure.
Additional Dwelling: Tiered tax of 8.0% to 10.0%.
Land: Fixed rate of 6.0%.
Example (10,000,000.0 ILS property): Additional dwelling tax is 878,899.0 ILS vs. Land tax of 600,000.0 ILS.
The focus is on the subjective intent of the buyer. Note that the seller can still declare it as a "Residential Dwelling" for Appreciation Tax exemptions while the buyer reports it as "Land."
Case 6 – Relief for an Apartment in a Purchase Group Not Yet Completed
Amendment 93 (2018) allows members of a "stuck" purchase group to be considered "Improving Dwellers":
At the time of joining the group, it was their only apartment.
4.0 years have passed and construction hasn't started, or 6.5 years have passed and possession wasn't delivered.
The delay was beyond the purchaser's control.
They must sell the rights in the group within 18.0 months of completion (Form 4).
Note: This is a specific statutory relief for qualifying purchasers in stalled purchase groups, not a general extension of the replacement-apartment deadline. Eligibility depends on the statutory conditions and the facts of the case, including the nature of the delay and the purchaser’s circumstances.
Case 7 – Special Populations
1. Discount for the Disabled
Under Regulation 11, a disabled or blind person purchasing an apartment for their own residence is entitled to:
Single Dwelling up to 1,978,745 ILS: Full exemption up to the first tier and 0.5% on the remainder.
Additional Dwelling or value above 2,500,000.0 ILS: A reduced rate of 0.5% from the first shekel.
Eligibility depends on the purchaser's disability status and the specific statutory requirements. The applicable conditions should be verified with the Israel Tax Authority before the purchase. Please check your case with the Israel Tax Authority
2. Bereaved Families
Under Regulation 11 of the Israeli Real Estate Taxation (Purchase) Regulations, eligible bereaved family members may qualify for reduced purchase tax when acquiring property for their own residence. Eligible groups may include bereaved parents, widows and widowers, and qualifying orphans, subject to the definitions and conditions established by law.
The relief generally allows eligible purchasers to pay purchase tax at a reduced rate of 0.5%, subject to the applicable rules and any relevant limits. It may generally be used for up to two qualifying transactions during a lifetime. Special eligibility and age requirements apply to orphans; the applicable rules include an age limit of 50 for certain orphans recognized up to age 21.
Eligibility is not automatic. The purchaser must meet the applicable statutory conditions, and the transaction must satisfy the requirements for the relief. Before completing a purchase, the purchaser should verify eligibility with the Israel Tax Authority and confirm whether the reduced rate is more favorable than the ordinary purchase-tax calculation.
3. New Immigrants (Olim) – 2026 Purchase-Tax Relief
Eligible new immigrants may qualify for special purchase-tax treatment when purchasing a residential apartment, subject to the statutory conditions and the applicable time window.
For an eligible purchase of a single residential apartment, the 2026 rules provide:
0% on the portion of the value up to NIS 1,978,745.
0.5% on the portion above NIS 1,978,745 and up to NIS 6,055,070.
8% on the portion above NIS 6,055,070, subject to the applicable upper threshold and statutory conditions.
The relief is not automatic. Eligibility, timing, and whether the special immigrant rate is more favorable than the ordinary single-apartment calculation should be checked for the specific transaction.
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