Israel Property transactions have two main tax issues. The first is Israel’s Purchase Tax, which may apply to the purchaser. The second tax is the Capital Gains Tax, which is imposed on a seller in case of profit gained as a result of the sale.

There are additional tax matters with regard to property transaction, however, as long as the transaction does not involve an entity, building rights or undeveloped lands, the only relevant taxes are those mentioned above. The marginal rate of purchase tax is 5% of the total purchase price and it is imposed on the purchaser of the property. Nevertheless, there is a reduced rate that applies on purchase of residential homes, as follows: Singular home for an individual purchasing his first and only home in Israel: Tax rate Amount 0.0% 1,026,660 Shekel Up to – (USD 250,000 / £ 150,000) 3.5% From - 1,026,660 to 1,442,870 Shekel (USD 250,000 / £ 150,000 to USD 350,000 / £ 215,000) 5% Over 1,442,870 Shekel (USD 350,000 / £ 215,000) Additional home: – an individual in possession of a home purchasing his next home in Israel: Tax rate Amount 3.5% 873,500 Shekel Up to – (USD 215,000 / £ 135,000) 5% 873,500 Shekel Over – (USD 215,000 / £ 135,000) In addition to the easy tax rate on the second home, in a case of an exchange where one purchases a second home with the intention to sell his original home, there is a time period of 24 months after the purchase, in which one may sell his first home and pay purchase tax on the second home by the reduced rate of a single home.

Alongside the general tax concessions described above, there are particular tax reliefs that apply in cases such as a gift transfer amongst relatives, where the receiver will be required to a third of the usual tax rate Another tax relief is in a case of purchase by an "Oleh" (an individual requesting resident by virtue of the statute of return) in which the tax rate will be: Tax rate Amount 0.5% 1,318,400 Shekel Up to – (USD 330,000 / £ 205,000) 5% 1,318,400 Shekel Over – (USD 330,000 / £ 205,000) This exemption can be used starting one year before receiving residency, and ends seven years afterwards.

Capital gains tax CG tax will apply whenever there is a value difference between the original purchase price and the current sale price. CG tax is imposed on a seller of a property. However, there are very generous tax exemptions for sale of residential homes as described below. The first CG tax exemption is a substantial tax exemption which allows an individual to sell residential property once every four years with a full tax relief. This exemption is independent and is not affected by one's financial status or by the number of properties owned by the assessee in Israel at the time.

A second tax exemption deals with a case of an individual that owns a single home which is his only property in Israel. In this case, he may sell his only home in Israel once every eighteen months with a full tax exemption on any profit gained. The next tax relief is in a case of a gift transfer amongst relatives of first degree relation. In this case the transferor will enjoy a full tax exemption. It should be noted that utilizing a tax exemption by the receiver of the gift is conditional and subject to holding period of the property by receiver. As described above, Israel is in fact a pleasant environment for property investments and provides easy tax exemptions on residential property. In order to properly benefit and utilize the tax exemptions described in this article, along other tax planning, it is strongly recommended to receive advice from an Israeli real-estate attorney familiar with the relevant tax laws.