IsraelLaw
Purchase tax is the single largest transaction cost facing a foreign buyer in Israel. On a NIS 3,000,000 apartment — roughly the entry point for a modest two-bedroom in Tel Aviv — a non-resident pays NIS 240,000 in purchase tax before paying their attorney, their agent, or any mortgage costs. On a NIS 8,000,000 property the bill climbs toward NIS 680,000. Yet many buyers first encounter the real numbers only after signing, when it is too late to renegotiate or reconsider.
This guide covers the statutory basis, the 2026 rates, who qualifies for a lower rate, how to file and pay without penalty, and where purchase tax sits within the full cost of an Israeli transaction. The rules are the same whether you are buying an apartment in Jerusalem, a studio in Tel Aviv, or commercial space anywhere in the country.
1. What Is Mas Rechisha and Who Is It Based On?
Mas Rechisha (מס רכישה) is Hebrew for "purchase tax." It is levied on the buyer — not the seller — every time a real estate transaction (*mekar mekarkein*) is completed in Israel. The legal basis is the Real Estate Taxation Law 5723-1963 (*Hok Misui Mekarkein*), specifically the purchase tax provisions in Sections 9 and 73 and the graduated rate schedules published annually by the Finance Ministry.
The tax is administered by the Israel Tax Authority's (Rashut HaMisim) dedicated Real Estate Tax Offices, which operate as separate departments from the income tax branches. There are Real Estate Tax Offices in Jerusalem, Tel Aviv, Haifa, Beer Sheva, Petah Tikva, Rishon LeZion, Netanya, and Nazareth — each covering transactions in their district.
The starting point for calculating who pays what is the buyer's residency status on the date of purchase. Israeli law draws a hard line between two categories:
- Israeli resident (toshav Yisrael) — someone whose primary residence and center of life is in Israel, as defined under the Income Tax Ordinance. This includes Olim who have already received their Israeli ID.
- Non-resident (lo-toshav) — any foreign national whose center of life is outside Israel, even if they spend considerable time in the country or own other Israeli property.
Non-residents pay more than Israeli residents in almost every scenario. The stated policy rationale is that foreign purchases represent investment demand that pushes prices up for local buyers.
Your residency status is assessed as of the date the purchase contract is signed — not the date of closing or registration at the Land Registry (Tabu). If you are in the process of making aliyah and your immigrant certificate has already been issued, present it at the Real Estate Tax Office to access the Olim rate track. If you are undecided about aliyah, be aware that signing as a non-resident locks you into the non-resident rate table; any subsequent change of status may give rise to a partial refund application, but the process is uncertain and not guaranteed.
2. Current Purchase Tax Rates for Non-Residents in 2026
Since 2015, Israel has applied an escalated purchase tax rate to buyers who are either non-residents or Israeli residents purchasing a property they will not use as their sole home. The government froze the rate brackets for the period 2025 to 2027, meaning the thresholds below will not adjust for CPI inflation during that window.
Non-Resident Rate Table (2025–2027 frozen brackets)
| Portion of Purchase Price | Rate | Tax on This Bracket |
|---|---|---|
| First NIS 6,055,070 | 8% | Up to NIS 484,406 |
| Amount above NIS 6,055,070 | 10% | 10% on each additional NIS |
Unlike the rates for Israeli residents buying their first home, there is no zero-rate bracket for non-residents. The 8% rate begins from the first shekel paid.
Worked Examples
NIS 2,000,000 apartment (e.g., studio in Tel Aviv periphery):
- 8% × NIS 2,000,000 = NIS 160,000
NIS 4,500,000 apartment (e.g., two-bedroom in central Tel Aviv):
- 8% × NIS 4,500,000 = NIS 360,000
NIS 8,000,000 villa (e.g., Jerusalem or Herzliya Pituach):
- 8% × NIS 6,055,070 = NIS 484,406
- 10% × NIS 1,944,930 = NIS 194,493
- Total: NIS 678,899
The government decided in late 2024 to freeze all purchase tax and capital gains thresholds at their 2024 year-end values through December 31, 2027. In a normal year, brackets are indexed to the CPI. The freeze means the NIS 6,055,070 threshold will not rise with inflation, effectively making the tax slightly more expensive in real terms each year the freeze remains in place. Confirm the current thresholds at the Israel Tax Authority website (misim.gov.il) before signing, as threshold values are published by administrative notice and can change.
3. Non-Resident Rates Compared with Israeli Resident Rates
The gap between resident and non-resident rates is large enough that it is worth knowing exactly what each group pays — and whether a change in residency status before signing could save you serious money.
Israeli resident buying their only home
An Israeli resident with no other residential property in Israel pays far less, on a graduated scale:
| Portion of Purchase Price | Rate |
|---|---|
| Up to approx. NIS 1,919,155 | 0% |
| NIS 1,919,155 to approx. NIS 2,276,360 | 3.5% |
| NIS 2,276,360 to approx. NIS 5,872,725 | 5% |
| NIS 5,872,725 to approx. NIS 19,575,450 | 8% |
| Above NIS 19,575,450 | 10% |
On a NIS 2,000,000 apartment, an Israeli resident buying their first home pays approximately NIS 2,830. The same property bought by a non-resident costs NIS 160,000 in purchase tax. That NIS 157,000 difference is real money, and it comes purely from residency status.
Israeli resident buying an additional property
An Israeli resident who already owns residential property in Israel is taxed almost identically to a non-resident: 8% on the first NIS 5,872,725 and 10% above. The threshold differs slightly from the non-resident bracket, but the effective burden is comparable.
For Olim who have made aliyah and already own an Israeli property: a second purchase triggers this investor rate, not the first-home track.
The tax savings from qualifying as a first-home Israeli resident or Olim can exceed NIS 150,000 on a typical Tel Aviv apartment. For buyers who are seriously considering aliyah within the next few years, the financial case for making aliyah before signing a purchase contract — rather than after — is substantial. Discuss timing with both your aliyah adviser and a tax attorney before committing to a purchase date.
4. Filing the Declaration and Paying: The 60-Day Rule
Purchase tax is not collected at closing or deducted automatically at the Land Registry. Your Israeli attorney files a declaration and arranges payment — but the deadlines run from the day you sign, not from when the Tax Office responds.
The Declaration (Form 7002)
Within 30 days of signing the purchase contract, your attorney must submit a purchase tax declaration (hatzharat mas rechisha, Form 7002) to the Real Estate Tax Office covering the district where the property is located. The declaration sets out:
- The buyer's identity details and residency status
- A description of the property (address, Land Registry block (*gush*) and parcel (*helka*) numbers)
- The purchase price and payment schedule
- The applicable tax rate track (non-resident, sole-home resident, Olim, etc.)
The Real Estate Tax Office reviews the declaration and issues a payment notice specifying the amount due.
The 60-Day Payment Deadline
Under Section 73 of the Real Estate Taxation Law, the tax must be paid within 60 days of signing the purchase contract. This is not 60 days from the date of the Tax Office's assessment notice — it runs from the signing date regardless of when the notice arrives.
If payment is made after 60 days, the outstanding amount is linked to the CPI and carries interest at the statutory rate set by the Finance Minister — currently 4% per annum. On a NIS 300,000 tax bill, even a 30-day delay adds approximately NIS 1,000 in interest; a 6-month delay on the same amount adds around NIS 6,000 plus full CPI linkage. On larger properties the cost of delay is proportionally more painful.
Paying in Instalments
If the purchase contract provides for payment of the purchase price in instalments over a period exceeding 12 months, Israeli law allows purchase tax to be paid in corresponding instalments — each instalment's purchase tax portion due within 60 days of the underlying payment date. This is common in off-plan (*dira mehakarkea*) purchases where buyers pay the developer in stages during construction. Your attorney's purchase tax declaration should reflect the agreed payment schedule.
Failing to file the Form 7002 declaration within 30 days carries a separate administrative fine on top of any payment penalty. In practice, experienced Israeli property attorneys file the declaration within days of signing — do not wait for the full 30-day window. If you are managing the transaction from abroad and your attorney's engagement letter does not explicitly include handling the Mas Rechisha declaration and payment, clarify this before signing the purchase contract. Overlooked declarations have caused Foreign buyers to receive penalty notices months after closing, when addressing them from abroad is significantly harder.
5. Transactions That Are Exempt from Purchase Tax
Not every real estate transaction in Israel triggers Mas Rechisha. Several categories of transfer are exempt in full or in part under Sections 62 and 63 of the Real Estate Taxation Law.
Gifts to Close Family Members
A gift (*matana*) of real estate between qualifying close family members is exempt from purchase tax under Section 62 of the law. The qualifying relationship is defined as: spouse, child, grandchild, parent, grandparent, and sibling — but only if the sibling has no consideration. The gift exemption applies regardless of whether the recipient is an Israeli resident or a foreigner, provided the transfer is genuinely gratuitous and not a disguised sale.
The gift is also exempt from capital gains tax (*mas shevah*) for the donor, under Section 62 of the same law. The recipient does inherit the donor's original acquisition cost, though — meaning the deferred gain will crystallize when the recipient eventually sells.
Transfers on Divorce
Transfers of property between spouses as part of a court-approved divorce settlement are exempt from purchase tax and capital gains tax under Section 4A of the Real Estate Taxation Law, provided the court order or written divorce agreement specifying the transfer has been submitted to the Real Estate Tax Office.
Inherited Property
Property passing through succession (intestate or under a will) is not treated as a "sale" under the Real Estate Taxation Law and therefore triggers no Mas Rechisha. The heir steps into the shoes of the deceased for capital gains calculation purposes: the acquisition cost for future CGT purposes is the original price the deceased paid, adjusted for CPI linkage and any improvements.
Transfers Between Co-Owners (Partition)
Where a property is jointly owned — commonly between siblings who inherited together — and one co-owner buys out the other, purchase tax applies only to the acquired share, not the full property value. The buyer's pre-existing ownership fraction is excluded from the taxable base.
The Israel Tax Authority scrutinises gift transactions between family members carefully, particularly where the parties are foreign nationals. If the "gift" recipient simultaneously takes over a mortgage on the property, or if there is any consideration that flows from the recipient to the donor (directly or indirectly), the Tax Office may reclassify the transaction as a sale and assess purchase tax and capital gains tax accordingly. Ensure that a gift transfer is genuinely unconditional, and that this is documented in the gift deed prepared by your attorney. A purchase tax exemption ruling (ptor maas rechisha) from the Real Estate Tax Office before completing the transfer provides legal certainty.
6. Olim (New Immigrants): Reduced Purchase Tax Rates
New immigrants (Olim Hadashim) get a reduced purchase tax rate as part of the aliyah incentive package. It applies only to the Oleh's first Israeli residential property and only if the purchase falls within a qualifying window around the aliyah date.
Who Qualifies
To access the Olim purchase tax rate, the buyer must:
- Hold a valid teudat oleh (immigrant certificate) issued under the Law of Return 5710-1950 or the Citizenship Law 5712-1952
- Purchase within the window of one year before or seven years after the aliyah date recorded in the teudat oleh
- Be purchasing their first Israeli residential property (the rate does not apply to commercial property, and it cannot be used more than once)
The Olim Rate Structure
The Olim rate is set by a specific table that changes periodically. Rather than quoting a figure that may become outdated, the key point is that the Oleh rate applies a single reduced percentage to the full purchase price — currently well below the standard 8% non-resident rate — up to a cap. For amounts above the cap, standard rates apply. Confirm the current Olim rate table with the Ministry of Aliyah and Integration (Misrad HaAliyah VeHaKlita) or directly with the Real Estate Tax Office before signing.
How to Claim the Olim Rate
The Olim rate is claimed at the Form 7002 declaration stage. Attach a certified copy of your teudat oleh to the declaration. If the aliyah date and purchase date fall within the qualifying window, the Real Estate Tax Office applies the Olim rate without requiring a separate application.
Some prospective Olim sign a purchase contract before receiving their teudat oleh, intending to complete aliyah before closing. Under the seven-year window rule, a purchase dated within one year before the teudat oleh issue date qualifies for the Olim rate — but only if aliyah is formally completed within that year. If you sign before your teudat oleh is issued, file the Form 7002 declaration at the non-resident rate initially and submit an amended declaration claiming the Olim rate once the teudat oleh is in hand. The Real Estate Tax Office will issue a refund of the difference. This requires proactive follow-up and is most safely handled by an attorney who specialises in Aliyah-related transactions.
7. How Mas Rechisha Fits Into the Total Cost of Buying in Israel
Purchase tax is the largest single closing cost for a non-resident buyer, but it is not the only one. Foreign buyers who budget only for the purchase price tend to get an unpleasant surprise when the full bill arrives.
Full Cost Breakdown for a Non-Resident Buyer
| Cost Item | Typical Amount | Notes |
|---|---|---|
| Mas Rechisha (Purchase Tax) | 8%–10% of price | From first shekel for non-residents |
| Buyer's attorney | 0.5%–1.5% + VAT | Minimum NIS 5,000–15,000 in practice |
| Real estate agent (buyer side) | 2% + 17% VAT | If agent represents buyer; legally mandatory written agreement |
| Land Registry registration (*Tabu*) | NIS 420–2,500 | Based on property value; fixed fee schedule |
| Mortgage arrangement fees (if financing) | NIS 3,000–8,000 | Bank opening fees; appraisal costs additional |
| Apostille and translation costs | NIS 2,000–6,000 | For foreign documents submitted to authorities |
For a NIS 3,000,000 purchase, a non-resident buyer should budget total transaction costs of approximately NIS 360,000 to NIS 420,000 — roughly 12%–14% of the purchase price — before taking out a mortgage. This is a meaningfully higher transaction cost than most Western European or North American markets, and it is a figure that rarely appears in the promotional materials of Israeli property marketers targeting overseas buyers.
The seller's costs — relevant to your negotiation
The seller typically owes capital gains tax (*mas shevah mekarkein*) on appreciation since their original purchase, though many qualify for the sole-home exemption under Section 49B of the Real Estate Taxation Law. They also pay the agent's commission (2% + VAT) on their side. A seller facing a large capital gains bill sometimes accepts a lower price to close quickly — worth knowing when you negotiate.
Mortgage costs
If you finance through an Israeli bank, Bank of Israel Directive 451 requires the lender to hold earthquake building insurance (bituach mivne) as a condition of the mortgage. It is a recurring annual premium, not a one-time cost, but it adds to the ongoing cost of ownership.
The purchase tax is payable to the Israel Tax Authority in Israeli shekels (NIS). If your funds are held abroad in foreign currency, budget for both the tax amount and the cost of currency conversion. Israeli banks and foreign exchange providers charge different spreads on NIS purchases. For large sums — NIS 200,000 or more — use a foreign exchange specialist rather than your standard bank transfer, as the savings on the exchange rate can easily cover the specialist's fee. Allow at least 5 business days for an international wire to clear and convert before the 60-day deadline arrives.