Quick Answer: When you sell an Israeli apartment as a non-resident, you pay mas shevach (capital gains tax on real estate) at 25% of the real gain after adjusting for inflation under the Land Taxation Law 5723-1963. The main exemption available to Israeli residents — selling your only home — usually does not apply to non-residents unless you own no apartment in your home country. For properties held since before 2014, a linear rate calculation reduces the effective tax below 25%. A withholding deposit of 7.5% of the sale price is collected from the proceeds at closing and credited against your final liability. The full process runs 3 to 6 months from signed agreement to completed Land Registry transfer.

Foreign nationals who own Israeli property often assume selling will mirror the process they know from home. It does not. The basic tax rate is the same as for Israeli residents — 25% on the real capital gain — but the exemptions that make most Israeli residential sales tax-free are largely unavailable to non-residents. What does work in your favor is the linear rate calculation for older properties, and the well-established process for completing the entire sale remotely through a Power of Attorney.

This guide covers every Israeli tax obligation you will encounter when selling — mas shevach, betterment tax, and withholding at source — along with the step-by-step sale process. For guidance specific to inherited property, see Selling Inherited Property in Israel.

1. What is Mas Shevach?

Mas shevach (literally "appreciation tax") is Israel's capital gains tax on real estate, governed by the Land Taxation Law 5723-1963. It applies whenever a property transfers for more than the seller paid for it. The taxable figure is the "real gain" — the nominal price difference stripped of inflation. The Israel Tax Authority (ITA, Rashut HaMisim) adjusts your original purchase price upward by the Consumer Price Index from the date you bought to the date you sold, and you pay 25% on whatever gain remains after that adjustment.

Mas shevach does not apply to every transfer. Inheriting property, certain urban renewal exchanges, and transfers between spouses under the Spouses (Property Relations) Law are treated separately. An outright sale for a profit always triggers it.

In practice: Under Section 48A of the Land Taxation Law 5723-1963, the taxable gain is the sale price minus the "adjusted cost" — your original purchase price plus documented costs (legal fees, mas rechisha purchase tax, renovation costs) all updated by the CPI. The ITA's calculator at misim.gov.il estimates the CPI adjustment automatically once you input the purchase and sale dates. Betterment tax you paid to the local planning authority is also deductible from the gain before you calculate your 25%. Keep records of every cost you incurred when buying and during ownership; anything you cannot document cannot be deducted.

2. Why Residency Changes Everything

Israeli tax law distinguishes sharply between resident and non-resident sellers when it comes to real estate. Residents can claim exemptions — most notably, the full exemption on selling their only home — that non-residents mostly cannot. The tax authority determines your status using the "center of life" test in Section 1 of the Income Tax Ordinance: where you maintain your primary home, where your family lives, where your bank accounts sit, and where you spend most of your time.

Passport nationality has no bearing on this. A US or UK citizen who owns an Israeli apartment but lives abroad is a non-resident for mas shevach purposes, even if they visit several weeks each year. An Israeli citizen who emigrated 10 years ago and lives full-time in London is also a non-resident.

In practice: The ITA sometimes requests supporting evidence before processing a non-resident sale: foreign utility bills, foreign tax returns showing foreign residency, travel records, and where relevant, a tax residency certificate from your home country's tax authority. If your situation is borderline — you spend more than 90 days per year in Israel, or you maintain a second address there — get a binding ruling (ishur mereshut hamissim) from the ITA before signing a purchase agreement. Declaring resident status when you are not qualifies as tax fraud under Section 216 of the Income Tax Ordinance.

3. The Linear Rate: A Significant Reduction for Older Holdings

Israel overhauled its real estate gains rules in 2013 through Amendment 76 to the Land Taxation Law, and the change is genuinely helpful for long-term property holders. For any property acquired before January 1, 2014, the total gain is split into two parts based on time:

  • The share of the gain earned before January 1, 2014 is taxed at the historical rate that applied when you acquired the property. For most individuals who bought residential apartments before 2012, that historical rate was 20%, not 25%.
  • The share earned from January 1, 2014 onwards is taxed at the current 25% rate.

The ITA calculates the split mechanically: it counts the total months of ownership, divides them into pre-2014 and post-2014 months, and attributes the gain in proportion. No one is asked to prove exactly when prices rose.

The practical result is noticeable. A non-resident who bought in 2000 and sells in 2026 holds the property for approximately 312 months. About 168 of those months (54%) predate January 2014 and are taxed at 20%. The remaining 144 months (46%) are taxed at 25%. The blended effective rate on the full real gain works out to roughly 22%, not 25%.

In practice: The linear rate calculation runs automatically through ITA Form 7002 ("Declaration on the Sale of a Right in Real Estate"). Your attorney will produce a preliminary calculation before closing so you know the withholding amount in advance. Ask to see it. The figure feeds directly into the 7.5% withholding deposit: the attorney caps the deposit at 25% of the calculated gain, so if the linear rate brings your effective liability below 7.5% of the sale price, the attorney deposits the lesser amount. This calculation is documented in writing and forms the basis for any refund claim you file afterward.

4. The Single-Apartment Exemption: A Narrow Door for Non-Residents

Section 49B of the Land Taxation Law grants a full mas shevach exemption on the sale of a single residential apartment, provided several conditions are met: the seller owned only one apartment, the property served as a residence, it was held for at least 18 of the 24 months before the sale, and the sale price falls below the exemption ceiling (approximately NIS 5.1 million in 2026, with partial exemption above that).

Section 49B(2) creates a specific opening for non-residents: you can claim this exemption if you own no residential apartment in your country of foreign residence. This is not a generous opening. The conditions that follow are the same as for residents.

Who actually qualifies under Section 49B(2)? A non-resident who rents in their home country and owns only the Israeli apartment may qualify, assuming they also meet the holding period and other conditions. A non-resident who owns a home abroad — in the US, UK, Australia, France, or anywhere else — does not qualify, regardless of the Israeli property's holding period.

In practice: To claim the Section 49B(2) exemption, you must support your Form 7002 with documentation from your home country: a current extract from the land or housing registry confirming you own no property there, your most recent home-country tax return (if it shows no rental or property income), and your current lease agreement if you rent. The ITA regional office handling the claim takes this documentation seriously and will reject applications without it. Gathering these documents can take 4 to 8 weeks, which is one more reason to start the tax process well before the closing date rather than in the final days.

5. Withholding at Source: The 7.5% Deposit

When a non-resident sells Israeli property, the buyer's side is legally required to withhold tax and deposit it with the ITA. The standard rate is 7.5% of the gross sale price, deposited within 30 days of the transaction date under Section 15A of the Land Taxation Law.

This is not a final tax. It is a deposit against your actual mas shevach liability. Once you file Form 7002 within 30 days of closing, the ITA assesses your true liability. If 7.5% of the price exceeds what you actually owe — which is common when the linear rate applies — you are entitled to a refund. If you owe more than the deposit, you pay the difference. Refunds typically take 3 to 12 months.

There are two ways to reduce or eliminate the withholding before closing:

  • An exemption certificate (ishur nikui mismas): Apply to the ITA before closing and receive a certificate confirming a lower withholding rate or full exemption. Your attorney deposits nothing (or a reduced amount) and you file Form 7002 within 30 days of the transaction instead.
  • The standard declaration route: The attorney deposits 7.5% at closing and you settle through Form 7002 afterward, claiming any refund due.

The exemption certificate is worth applying for in most cases, even if only to reduce cash tied up waiting for a refund. The ITA processes these applications in approximately 3 to 6 weeks through the Masav online portal.

In practice: Your buyer's attorney is jointly liable under Section 15A if the withholding is not deposited on time. They will not deviate from this rule without a valid exemption certificate in hand. Apply for the certificate as soon as you sign the purchase agreement, not in the final week before closing. You will need: the signed purchase agreement, your original purchase deed or Land Registry extract (nesach tabu), and the completed Form 7002 calculation showing your estimated gain. The application goes to the ITA regional office with jurisdiction over the property's location or through the Masav portal. Processing time: roughly 3 to 6 weeks.

6. Betterment Tax: A Separate Bill from a Separate Authority

Betterment tax (hetel hashbacha) is unrelated to mas shevach. It is levied by the local planning authority under the Planning and Building Law 5725-1965 whenever a planning decision has raised the value of your property. Rezoning, expanded building rights, a new transit line nearby, or approval under TAMA 38 or Pinui-Binui can all trigger it. The rate is 50% of the planning-driven value increase.

You pay betterment tax when you sell. The local planning committee (va'ada mekomit) issues a demand, and you need a clearance certificate before the Land Registry (Tabu, Misrad HaRasham) will register the title in the buyer's name.

For most straightforward apartment sales with no recent planning changes, betterment tax is either zero or a small administrative fee. For properties that benefited from added building rights, the bill can be substantial.

In practice: The betterment clearance process starts with a formal inquiry to the local planning committee, typically the municipality's engineering or planning department. Allow 2 to 4 weeks for their response. If the demand appears too high, you can object within 45 days of receiving it, and many assessments are reduced on objection because the committee's initial calculation is sometimes based on incomplete information. Factor the clearance timeline into your sale schedule — you cannot close and register the Tabu transfer without it. Any betterment tax you pay is deductible from your mas shevach gain under Section 48A of the Land Taxation Law.

7. Selling Remotely via Power of Attorney

Non-residents complete most Israeli property sales without setting foot in the country. A notarized, apostilled Power of Attorney (PoA) authorizes your Israeli attorney to sign the purchase agreement, manage the ITA filings, receive sale proceeds, and register the title transfer at the Tabu on your behalf.

The process:

  1. Your Israeli attorney drafts the PoA with the specific powers needed for a real estate sale, ITA declarations, and Tabu registration.
  2. You sign the PoA before a local notary in your country of residence.
  3. You attach the Hague apostille (Israel joined the Hague Convention on apostilles in 1962, so a standard Hague apostille is sufficient for most countries).
  4. You send the original by courier to Israel — scans and PDFs are not accepted for Tabu registration.
  5. Your Israeli attorney handles the entire transaction from that point.

The PoA must be specifically worded for property transactions, ITA filings, and Land Registry registration. A general-purpose PoA often fails at one of those steps. If your existing PoA is more than 3 to 5 years old, the Tabu may treat it as stale and require a fresh one.

The full Tabu transfer process, from filing to a clean title printout, runs 2 to 5 months.

In practice: The ITA's Masav portal and the Tabu's Netav portal both accept electronic submissions by authorized attorneys holding PoA. Neither office requires the seller's physical presence at any stage of the transaction. What they do require is an original, apostilled signature — not a scanned copy — on both the PoA and the Form 7002 tax declaration (unless submitted electronically by the attorney). If you are currently in Israel and planning to sell later from abroad, sign a comprehensive PoA now before you leave. Routing originals through a foreign notary and international courier adds 2 to 4 weeks to an already tight timeline.

8. Double Tax Treaties: Avoiding a Second Bill at Home

Israel has double taxation treaties with the United States, United Kingdom, France, Germany, Canada, Australia, and approximately 56 other countries. For real estate, the standard treaty rule gives the country where the property is located — Israel — the primary right to tax the gain. Your home country taxes what is left, if anything, after applying a foreign tax credit for the Israeli mas shevach you paid.

What this means in practice varies by country:

  • US citizens report the Israeli gain on Schedule D and claim the Israeli mas shevach as a foreign tax credit on Form 1116. The credit is capped at the US tax attributable to foreign-source income, so the Israeli tax usually covers the entire US federal liability on the gain. State income tax — in California, New York, and several other states — may still apply because state-level tax codes do not uniformly follow the federal foreign tax credit.
  • UK residents selling Israeli property include the gain in their UK self-assessment return and claim relief under the UK-Israel DTT, receiving credit for Israeli tax paid against UK Capital Gains Tax.
  • Canadians and Australians follow similar credit mechanisms under their respective treaties.

The treaty does not reduce your Israeli mas shevach. It prevents your home country from taxing the same gain on top of it.

In practice: US sellers: because Israeli mas shevach on most residential sales runs between 15% and 25% of the real gain, and the US federal long-term capital gains rate is 15% to 20%, the Israeli tax typically covers the full US federal bill. The Section 121 exclusion for a US primary residence (up to $250,000 gain per person) is available only if the Israeli property qualifies as your US-tax-residence primary home — which it almost certainly does not for non-residents who live in the US. Do not assume the US exclusion applies. Consult a tax advisor experienced in both US and Israeli real estate taxation before closing.