Quick Answer: Israel has no inheritance tax. The Estate Tax Law (Mas Yerusha) was abolished in 1981 under the Estate Tax Repeal Law 5741-1981, and no equivalent levy has replaced it. Receiving an Israeli inheritance (cash, real estate, shares, or other assets) does not by itself trigger Israeli tax. Several related taxes can arise depending on what you inherit and what you do with it: capital gains tax (Mas Shevach) on real estate sold after inheritance, income tax on pension fund payouts, and your home country's estate or inheritance tax if you are a US citizen, UK domiciliary, or citizen of another country that taxes foreign inheritances.

It is one of the first questions diaspora families ask when a parent or grandparent dies in Israel: "How much inheritance tax do we owe?" The answer surprises many people. Israel, unlike the United States, United Kingdom, Germany, France, and most OECD countries, imposes no tax at all on the act of inheriting property. The estate does not pay a levy before distribution, and the heirs do not pay a levy when they receive their shares.

That does not mean the Israeli tax system has nothing to say about inherited assets. The Israel Tax Authority (Rashut HaMissim, ITA) has several points of interest in an estate โ€” just not at the moment of inheritance itself. The tax questions arise later: when inherited real estate is sold, when a pension fund makes a payout to beneficiaries, when inherited company shares are transferred or disposed of, and when the betterment levy is assessed on properties that were improved before death. For foreign nationals who are also subject to estate or inheritance tax in their home country, there is a second layer of complexity: the country they live in may want a share of an Israeli inheritance regardless of Israeli rules.

This guide explains exactly when Israeli tax applies to an inheritance, how each tax works in practice, what US and UK heirs need to know about their own obligations, and the practical steps that reduce tax exposure and keep the probate process moving.

1. Israel Has No Inheritance Tax: The History and the Current Law

Israel introduced an estate tax in 1949, shortly after independence. For three decades it was a fixture of the Israeli tax system โ€” a progressive levy on the total value of a deceased person's estate before distribution. In 1981 the Knesset repealed it. The Estate Tax Repeal Law 5741-1981 abolished the estate tax entirely, with no sunset or grandfathering period. No replacement tax on inheritance has been enacted in the more than four decades since.

Several Knesset committees have discussed reinstating a form of estate or inheritance tax, most recently in 2023 as part of broader wealth-tax debates. None of those proposals became law. As of June 2026, the legal position is unambiguous: there is no mas yerusha, no estate duty, and no inheritance levy in Israel.

The entire value of an Israeli estate passes to the heirs without any Israeli tax charge triggered by the death itself: the apartment in Tel Aviv, the bank accounts, pension savings, the share portfolio, everything. The estate administrator (ืžื ื”ืœ ืขื™ื–ื‘ื•ืŸ) does not prepare an estate tax return. The Inheritance Registrar (Rasham HaYerusha) does not require any tax clearance from the ITA as a condition of issuing the succession order, unlike the UK, where HMRC issues a clearance certificate before probate can be granted. Israel's approach is simply: here are the assets, they now belong to the heirs.

In Practice: An American family in New York inherited their Israeli father's Tel Aviv apartment worth NIS 3.2 million (approximately USD 850,000), a Bank Hapoalim account containing NIS 420,000, and a pension fund balance from his former employer. None of these assets triggered Israeli tax on the date of death or during the succession order process at the Inheritance Registrar in Tel Aviv. The succession order was issued by the Registrar's office without any ITA clearance requirement. The family's Israeli attorney confirmed that a US estate tax return was required on the family's side, but no Israeli return was needed for the act of inheritance itself.

2. What Taxes Do Apply When You Inherit in Israel

Although there is no tax on receiving an Israeli inheritance, the ITA's interest in an estate begins the moment heirs start doing things with what they have inherited. The four main tax-triggering events are:

  • Capital gains tax (Mas Shevach) at 25% on inherited real estate that is later sold. This is the most common tax issue for foreign heirs of Israeli property.
  • Income tax on pension and provident fund payouts (keren pensia, keren hishtalmut, kupat gemel). The rate depends on the fund type and the heir's relationship to the deceased.
  • Capital gains tax on inherited company shares that are sold or transferred, whether listed on the TASE or held in a private company.
  • The betterment levy (Hetel Hashbacha), which is not inheritance tax but a levy on real estate appreciation from local planning decisions. It becomes payable when the property is sold, and in certain cases can be deferred, shifting the payment obligation to the heirs.

Two related points often come up. First, there is no purchase tax (Mas Rechisha) when real estate passes to you by inheritance: under Section 4 of the Land Taxation Law, a transfer on inheritance is not a "sale," so the registration of the property in your name at the Land Registry costs only the filing fees. Second, if you keep an inherited apartment and rent it out, the rent is taxable in Israel. An individual landlord of a residential apartment can choose to pay a flat 10% on the gross rent with no deductions, or be taxed at regular rates on net rental income after expenses and depreciation; the right choice depends on the rent level and your home-country credit position.

Your home country may also tax what you inherit. American, British, Australian, and European citizens often face estate or inheritance tax regimes that reach assets held anywhere in the world, including Israeli property. Section 6 covers the details.

3. Capital Gains Tax on Inherited Real Estate (Mas Shevach)

When a foreign heir inherits an Israeli apartment or other property and later sells it, the Israel Tax Authority calculates capital gains tax (Mas Shevach) under Part E1 of the Land Taxation Law 5723-1963.

The Tax Rate

Non-residents who sell Israeli real estate pay Mas Shevach at a flat 25% on the real gain โ€” the inflation-adjusted appreciation after stripping out the CPI increase from the original purchase price. The 25% rate applies regardless of the heir's country of residence or income level. Because the heir takes over the deceased's purchase date, a qualifying residential apartment that the deceased bought before 1 January 2014 benefits from the linear exemption in Section 48A(b2): the share of the real gain that accrued before that date is exempt, and only the later share is taxed at 25%.

The Acquisition Price for Inherited Property

The heir does not receive a new acquisition price. Inheritance is not a sale (Section 4 of the Land Taxation Law), so no tax arises at death. But under Section 26(a)(2), where the deceased died on or after 1 April 1981, the heir's acquisition value is the value that would have applied had the deceased sold the property, meaning the deceased's own cost, indexed for inflation. Under Section 37(1)(g) the acquisition date is also the deceased's. The appreciation that built up during the deceased's lifetime is therefore taxed when the heir sells, unless an exemption applies.

In Practice: A Paris-based heir inherited her mother's Haifa apartment in January 2025. Her mother had bought it in mid-2005 for NIS 620,000, and it was worth NIS 2.8 million at the date of death. The heir's acquisition price is not NIS 2.8 million: under Sections 26(a)(2) and 37(1)(g) of the Land Taxation Law she takes over her mother's NIS 620,000 cost and 2005 purchase date. When she sold the apartment in March 2026 for NIS 3.05 million, the nominal gain was NIS 2.43 million. Because it was a qualifying residential apartment bought before 2014, the share of the real gain that accrued up to 1 January 2014 (about 8.5 of the 20.7 years of ownership, roughly 41%) was exempt under Section 48A(b2), leaving about 59% taxable at 25%. Ignoring inflation indexation and deductible expenses for simplicity, that is about NIS 1.43 million of taxable gain and about NIS 358,000 of Mas Shevach; indexing the 2005 cost reduces the figure. Had her mother owned no other apartment, and had the heir produced a certificate from the French tax authorities that she owns no home in France, the inherited-apartment exemption in Section 49B(5) could have made the sale fully exempt (Sections 49A(a) and 49B(5)).

The Sole-Apartment Exemption

Israeli residents who sell their only home can qualify for a full capital gains exemption under Section 49B of the Land Taxation Law. A non-resident can use these exemptions only by producing a certificate from the tax authority of their country of residence confirming that they own no residential apartment there (Section 49A(a)). For heirs, Section 49B(5) exempts the sale of an inherited qualifying apartment by the deceased's spouse, descendant or a descendant's spouse, where the deceased owned only that one apartment and would have been exempt on selling it. Foreign heirs who own a home abroad cannot meet the certificate condition and should budget for 25% Mas Shevach on the taxable gain measured from the deceased's cost, with the pre-2014 share of the gain exempt for a qualifying apartment.

Withholding at Source

Under Section 15(b) of the Land Taxation Law, the buyer of an Israeli property for cash pays the ITA an advance on account of the seller's betterment tax: 7.5% of the price where the property was acquired on or after 7 November 2001, and 15% where an individual seller's acquisition date is earlier. Because the heir takes over the deceased's acquisition date, an apartment the deceased bought before November 2001 attracts the 15% rate. The advance is not a special rule for non-residents; it applies to every seller, and it does not apply where the seller claims the qualifying residential apartment exemption (Section 15(h)). Heirs who expect less tax can ask the Director to reduce the rate under Section 15(e) by the deadline for the sale declaration (30 days after signing); the Director must answer within 20 days or by the self-assessment deadline, whichever is later.

4. Tax on Inherited Israeli Pension and Provident Funds

Israeli pension and provident funds (keren pensia, keren hishtalmut, kupat gemel, and managers' insurance โ€” bituach menahalim) do not form part of the estate for inheritance purposes. They pass directly to named beneficiaries (mamanim) regardless of what the will says, governed by the fund's regulations and the National Insurance Law 5754-1994. Because they bypass the estate, they also bypass the succession order process at the Inheritance Registrar.

However, they are not tax-free when received:

  • Training fund (keren hishtalmut) payouts are taxed as ordinary income at the beneficiary's marginal rate. If the deceased held the fund for less than six years, a higher rate applies.
  • Provident fund (kupat gemel) payouts are partially exempt on the principal portion accumulated through employer-employee contributions; earnings on those contributions are taxable. The exact split depends on whether the deceased had reached retirement age and the fund's composition at the date of death.
  • Monthly pension entitlements passing to beneficiaries are taxed as ordinary income under Section 2(5) of the Income Tax Ordinance 5721-1961 at marginal Israeli tax rates (10%โ€“50% in 2026).
In Practice: A deceased Israeli employee's managers' insurance (bituach menahalim) policy held NIS 580,000 accumulated over 28 years of employment. The beneficiary was his adult daughter living in Canada. The insurance company (Clal Insurance) required the daughter to complete Form 161A (notification of pension entitlement upon death) and submit it together with the Israeli death certificate and the succession order. The ITA assessed the lump-sum payout: approximately NIS 250,000 of the total was attributable to employer severance contributions that had already received tax benefits, making them taxable upon distribution at the beneficiary's marginal rate; the remaining NIS 330,000 was attributable to investment gains in the tax-exempt pension track and was received free of Israeli withholding. The daughter's Canadian tax obligation on the total sum was governed by the Israel-Canada double taxation treaty (1976), which assigns taxing rights on pension income to the country of residence โ€” Canada โ€” allowing her to credit the Israeli withholding against her Canadian tax liability.

5. Inherited Israeli Company Shares and Securities

When an heir inherits shares in an Israeli company โ€” whether publicly listed on the Tel Aviv Stock Exchange (TASE) or held in a private company โ€” the inheritance itself attracts no Israeli tax. The heir takes over the deceased's original cost and acquisition date, just as with real estate: for a deceased who died after 31 March 1981, the definitions of "original price" and "acquisition date" in Section 88 of the Income Tax Ordinance use the figures that would have applied had the deceased sold the shares. Any subsequent capital gain on sale is taxed at 25% for non-residents on the nominal gain (without CPI linkage for foreign-currency shareholders) or at 30% for a controlling shareholder under Section 91(b) of the Income Tax Ordinance.

For listed TASE shares, withholding at 25% is typically collected by the custodian bank when the heir disposes of the securities. For private company shares, the seller is responsible for self-reporting the gain to the ITA within 30 days of the sale under Section 91(e) of the Ordinance and paying the tax by that deadline.

One important distinction: where the deceased held shares in a company that benefited from approved-enterprise or preferred-enterprise tax incentives, the heir should obtain advice before selling those shares. A sale of shares in such a company can sometimes disrupt the incentive regime, triggering clawback provisions or creating unexpected tax obligations for the company itself.

6. Your Home Country's Estate Tax on Israeli Assets

Israel imposes no inheritance tax, but your home country might. Foreign nationals inheriting Israeli assets need to understand their own country's rules, which can apply to assets held anywhere in the world.

United States Citizens and Green Card Holders

US citizens and long-term green card holders are subject to US federal estate tax on their worldwide estate, including Israeli assets. For 2026, the federal estate tax exemption is $15 million per individual ($30 million for married couples using portability), the level set by the 2025 tax law (the One Big Beautiful Bill Act) and indexed for inflation from 2027. Estates below that threshold owe no federal estate tax; estates above it are taxed at 40% on the excess. Most diaspora families inheriting from an Israeli parent are the heirs, not the decedent โ€” so the US estate tax obligation arises if the deceased was themselves a US citizen or domiciliary. If the deceased was only an Israeli citizen with no US connection, US estate tax generally does not apply to the inheritance on the heirs' side. There is no US-Israel estate tax treaty, so coordination between US estate reporting and Israeli succession requires care.

In Practice: A US-citizen father living in Israel died in March 2026 with a global estate of approximately USD 4.2 million โ€” NIS 2.4 million in Israeli real estate, NIS 800,000 in Israeli bank accounts, and USD 2.6 million in a US brokerage account. His estate was below the 2026 USD 15 million federal exemption threshold, so no US estate tax was owed. Because his gross estate was also below the filing threshold, no IRS Form 706 (US Estate Tax Return) was required; a Form 706 would only have been needed, within nine months of death, to elect portability of his unused exemption to a surviving spouse. Either way, US estate filings have no impact on the Israeli Inheritance Registrar's process; Israel does not require or recognize a US estate tax return. The executor retained an Israeli attorney and a US estate attorney simultaneously, coordinating the two probate tracks in parallel rather than sequentially.

Reporting Obligations for US-Person Heirs

A US citizen or green card holder who inherits from a foreign (non-US) person owes no US tax on the receipt, but still has reporting to do:

  • Form 3520: Bequests from a foreign person totaling more than $100,000 in a calendar year must be reported on IRS Form 3520, filed by the due date of your income tax return (including extensions). The form is informational, but late filing carries a penalty of 5% of the inheritance's value for each month it is late, up to 25%.
  • FBAR and Form 8938: If you keep an inherited Israeli bank or brokerage account in your name and your foreign accounts together exceed $10,000 at any point in the year, you must file FinCEN Form 114 (FBAR). Larger balances may also require Form 8938 under FATCA.
  • Future income: Rent, interest, dividends and sale gains from the inherited Israeli assets are reportable on your US return, with a foreign tax credit for Israeli tax paid under the US-Israel treaty.

United Kingdom

UK inheritance tax (IHT) applies to the worldwide estate of individuals within its scope and to UK-sited assets of everyone else. Since 6 April 2025, scope turns on long-term UK residence (broadly, UK residence in at least 10 of the previous 20 tax years) rather than domicile. The standard rate is 40% above the nil-rate band (ยฃ325,000 in 2026, plus the residence nil-rate band of ยฃ175,000 for passing a main residence to direct descendants). There is no UK-Israel inheritance tax treaty. Individuals within the scope of UK IHT who hold Israeli property must include it in their IHT calculation. The fact that Israel charges no tax on the same inheritance does not create a credit against UK IHT โ€” these are entirely separate obligations, and absent a treaty, both can apply. A UK estate with an Israeli apartment and a London flat needs separate legal advice in each jurisdiction.

Other Countries

Germany, France, Japan, South Korea, and the Netherlands all impose inheritance taxes on assets inherited by residents, even when those assets are located abroad. In each of these countries, residents who inherit Israeli property may owe domestic tax on the Israeli share. Where the country has an estate or inheritance tax treaty with Israel โ€” rare, since Israel's absence of an estate tax makes such treaties uncommon โ€” the treaty will govern. In most cases, heirs from these countries should consult a tax adviser in their country of residence before the estate is distributed, not after.

7. The Betterment Levy (Hetel Hashbacha): Not Inheritance Tax, But Often Confused With It

One tax that regularly causes confusion in Israeli estate matters is the Hetel Hashbacha โ€” the betterment levy. This is not an inheritance tax. It is a municipal levy on the increase in land value that results from a local planning decision โ€” for example, a municipality zoning change that allows more floors to be built on a property, or granting additional building rights (zkhuyot bniya) that increase the land's value.

Under the Planning and Building Law 5725-1965 and the Land Taxation Regulations, the Hetel Hashbacha is payable when a property is sold or when a building permit is applied for. It is assessed by the local municipality (iriya) or local planning committee, not by the ITA. The rate is 50% of the planning-related value increment.

Where Hetel Hashbacha connects to inheritance is through the deferral mechanism. Under Section 7C of the Land Betterment Levy Regulations, a betterment levy that became due during a property owner's lifetime can be deferred until the property is next sold โ€” including by an heir after inheritance. This means that heirs who sell an inherited Israeli property can find themselves paying not only Mas Shevach (capital gains tax) but also a deferred Hetel Hashbacha charge that was assessed on the deceased's account but never paid. Both amounts are deducted from the sale proceeds at closing.

In Practice: A property in Ramat Gan had a betterment levy assessment of NIS 320,000 issued by the Ramat Gan local planning committee in 2021 after the building received additional building rights under a TAMA 38 (National Outline Plan) reinforcement project. The deceased property owner requested deferral under Section 7C and obtained a deferral certificate from the local committee. When his Australian daughter inherited the property and retained an attorney to sell it in 2026, the attorney's due diligence at the Ramat Gan municipality office uncovered the outstanding deferred levy. The NIS 320,000 was deducted from the sale proceeds at closing and paid to the Ramat Gan municipal treasury before the net amount was transferred to the heir. Had the attorney not identified the lien, the buyer's legal team would have flagged it during their own title search โ€” but knowing about it in advance allowed the parties to negotiate a more accurate net price.

Before marketing an inherited Israeli property for sale, commission a municipal clearance check (shumar munitzipali) at the relevant local authority to identify any outstanding betterment levies, arnona arrears, or improvement contributions that will reduce the net proceeds.

8. Practical Steps for Foreign Heirs Managing Israeli Tax Exposure

Foreign heirs can take concrete steps to understand and minimize their Israeli tax exposure before they make decisions about the inherited assets. The sequence matters: certain elections and applications have hard deadlines, and missing them is expensive.

  1. Gather the deceased's purchase records for real estate. Because the heir takes over the deceased's acquisition value and date (Sections 26(a)(2) and 37(1)(g) of the Land Taxation Law), the original purchase contract, payment records and improvement invoices determine the taxable gain on a later sale. Collect them promptly after the succession order is issued, from the family's papers, the Land Registry file or the lawyer who handled the purchase. A date-of-death appraisal can still help with the estate inventory and with tax in the heir's home country, but it does not set the Israeli acquisition price.
  2. Plan for the buyer's advance before signing. Under Section 15(b) of the Land Taxation Law the buyer pays the ITA an advance on account of the seller's tax, 7.5% of the price (15% where the deceased acquired the property before 7 November 2001), unless the seller claims the qualifying residential apartment exemption. If the expected tax is lower, file a reasoned request to reduce the advance under Section 15(e) by the deadline for the sale declaration, 30 days after signing. Otherwise the excess is refunded, with linkage and interest, only after the assessment.
  3. Identify all pension and provident fund beneficiary designations before applying to the Inheritance Registrar. Pension funds, keren hishtalmut accounts, and managers' insurance policies bypass the estate entirely. Contacting the ITA's public inquiries department and the Supervisor of Capital Markets (Memuneh Shuk HaHon) within the Ministry of Finance, together with the deceased's employer, will help identify which funds exist and who the designated beneficiaries are. These cannot be altered after death.
  4. Check for deferred betterment levies and outstanding municipal charges. A title search at the Land Registry (Tabu) reveals encumbrances on the property, but betterment levies may not appear as registered liens. Request a municipal clearance letter from the relevant local authority covering arnona, water charges, and betterment levy deferral status.
  5. Understand your home-country obligations before distributing the estate. If the deceased was a US citizen or domiciliary, the estate attorney should determine whether a Form 706 filing is required. US-person heirs should diary their own Form 3520 and FBAR reporting (see Section 6). Where the deceased was within the scope of UK IHT, the family should consult a UK inheritance tax specialist before the estate is distributed and funds are transferred abroad โ€” the UK IHT return deadline is six months from the date of death, and late payment attracts interest.
In Practice: A dual US-Israeli citizen died in February 2026 leaving two adult children: one living in Israel, one in New York. The estate included a Tel Aviv apartment worth NIS 4.1 million, a Bank Leumi portfolio of NIS 680,000, and a pension from his Israeli employer worth NIS 1.2 million. The Israeli succession order was filed with the Inheritance Registrar at the Tel Aviv District Court branch in March 2026 and issued in June 2026. In parallel, the New York executor confirmed with a US estate attorney that the worldwide estate was well below the federal filing threshold, so no IRS Form 706 was due. The apartment was sold in August 2026 after the Israeli heir obtained an ITA withholding exemption certificate in July โ€” processing took six weeks at the Tel Aviv South assessment office on Namir Road โ€” confirming that the heir qualified for the Israeli sole-apartment exemption as an Israeli resident who intended to occupy the property. The New York-based heir's share of the sale proceeds was transferred by wire through a licensed foreign-exchange dealer at a rate 0.4% better than the bank's spot rate, saving approximately NIS 16,000 on the NIS 4 million transfer.

Double Taxation Treaties

Israel has double taxation treaties (DTTs) with over 60 countries governing income tax and capital gains, but very few treaties specifically address estate or inheritance taxes, largely because Israel has not had an estate tax since 1981, making a bilateral mechanism unnecessary from Israel's side. The income and capital gains DTTs are still relevant for pension payments and share disposals: they typically determine which country has the primary right to tax a specific income stream and provide for credits where both countries impose tax. The Israel-US tax treaty (1995), the Israel-UK treaty (1962, updated), and the Israel-Germany treaty (2016) are the ones most commonly relevant to diaspora inheritance situations.

Where a double tax treaty applies to capital gains on real estate, Israel almost universally retains the right to tax gains on Israeli-sited property under the real property article, regardless of where the heir lives. The heir's country of residence typically then provides a credit for the Israeli tax against domestic tax on the same gain. This credit mechanism means that tax is usually not paid twice on the same gain โ€” but it requires active coordination between the two countries' returns.