How does betterment tax (mas shevach) work when a non-resident sells Israeli property?

The eligible cost base includes the original purchase price adjusted for CPI inflation from purchase to sale, plus the following documented expenses: purchase tax paid at acquisition, legal fees for the purchase and sale, real estate agent commissions, documented improvement costs (invoiced renovations with building permits), and mortgage arrangement fees. Costs without documentary evidence — receipts, contracts, and bank transfer records — cannot be deducted. For properties acquired before January 2014, a linear calculation applies: the portion of the gain attributed to the period before that date is taxed at the lower historical rates (generally 20% for the pre-2014 period), reducing the effective rate on long-held assets. The Israel Tax Authority's Real Estate Tax Office (Mas Mekarke'in) administers the tax, and each sale requires a self-declaration form filed within the statutory deadlines.

The most important practical concern for non-residents is the withholding mechanism. Section 15A of the Land Taxation Law requires the purchaser to withhold 7.5% of the total consideration and pay it directly to the Israel Tax Authority unless the seller holds a reduced or exempt withholding certificate issued in advance. A non-resident who expects their actual tax to be lower than 7.5% of the gross price — because the gain is small relative to the price or because deductible costs are large — should apply to the Real Estate Tax Office for a reduced withholding certificate before signing the sale agreement. That application takes 2–4 weeks and requires preliminary calculations from an Israeli tax adviser. Double taxation treaties between Israel and the seller's country of residence may reduce or eliminate the Israeli tax, but the treaty benefit must be claimed proactively through the tax return.

From the full guide: Betterment Tax in Israel (Mas Shevach): A Complete Guide for Property Sellers

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